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Pessimism deterring consumers from payment protection insurance

14 July 2008 / by Rachael Stiles
Pessimism about the UK's economic climate and the squeeze on household budgets both mean that consumers are not opting to cover their outgoings with payment protection insurance.

As the cost of living grows, almost 70 per cent of Brits said that they would not be willing to take out payment protection insurance (PPI) in order to pay their mortgage, insurance premiums and other outgoings, research from the Association of British Insurers has found.

More than 90 per cent of the British population think that the country's economy is in a worse state than it was this time last year, and more than 80 per cent expect the situation to worsen further in the next year. Unemployment is on the rise as companies put cost-cutting plans into action.

But despite their pessimism, and the fact that almost two thirds said that they would not fair well if they were made redundant tomorrow, Brits are unwilling to purchase protection which could provide financial support in the event that they become unemployed.

"It is worrying that so many people are not prepared to look at taking out protection insurance, even insurance which covers redundancy given the uncertain economic outlook." said Nick Kirwan, the ABI's assistant director of health and protection insurance.

"It's clear that we need to work harder to get the message across about the peace of mind and value that having the right protection insurance gives individuals and families. We recently published a consumer factsheet on protection insurance products. We hope this will encourage more people to consider protecting their most important financial assets - their income and their home."

Half of respondents to the survey said that they have life insurance, while 39 per cent said that they do not have life insurance, payment protection insurance, or mortgage payment protection insurance (MPPI).

Rebecca Driver, the ABI's director of research and chief economist said that "Given the economic outlook and the risk of rising unemployment, people need to develop strategies to protect themselves better."

As one way of coping with the rising cost of living, thousands of middle class workers are taking on second jobs according to city analyst Capital Economics. Lawyers, police officers, business analysts, and IT workers are all among those moonlighting in order to make ends meet.

The sort of jobs that the middle classes are taking on include freelance work, selling things on eBay, designing websites, or working as chauffeurs. There has been a five per cent rise in the number of people taking on a second job compared to previous periods of recession, bringing the current total to 1.15million as disparate groups are united by financial need.

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