Hidden cost of unemployment to drivers

car wrecks Picture by: Frank May/DPA/Press Association Images

When you lose your job, you have enough to worry about already, trying to make your reduced income cover your costs. So it's adding insult to injury that insurers will be conspiring to make life more expensive for you.

An investigation into car insurance cover has revealed that some will refuse to offer cover for unemployed drivers, while others will inflate the price by anything up to 400%.

Price hike

The research, by Moneysupermarket for the Daily Mail, found a number of companies that refused to offer any quotes for an unemployed driver - including Esure, Allianz and Shelia's Wheels.

Of those that continued to offer cover, a number increased the cost of their policies dramatically. On the example of a 40 year old man, Hastings Direct increased premiums 442%, Santander 280%, and Churchill 32%.
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Why?

It seems like a cruel blow for a group that is already suffering enough. However, Malcolm Tarling, a spokesman for the Association of British Insurers was keen to highlight to AOL that this wasn't any form of discrimination.

He said: "Where a company charges a higher insurance premium for someone who is unemployed, it will be because of their own claims experience: they will have found that claims costs and frequencies among this group tend to be higher than average. They don't discriminate against the unemployed, they reflect the risks."

High risk

There may be a number of reasons why claims could be higher. Tarling points out that those looking for work may be covering longer distances and making more frequent journeys. If their previous job was sedentary, then there is also a much higher chance they will be travelling around during the day.

The newspaper also speculated that insurers may be concerned about an unemployed driver's ability to pay for vital maintenance, or may have concerns that those with squeezed incomes may be vulnerable to the temptations of insurance fraud.

Cut costs

However, Tarling says that these increases are not across-the-board, and that because they reflect each company's own claims experiences, there will be large disparities between the premiums charged to unemployed drivers.

His advice, he says, is to take the time to compare policies from a number of providers, and take advantage of the different experiences of the insurers in order to track down a cheaper deal.

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