CHICAGO -- Several insurance companies are counting on Americans' deepening job insecurities to build a profitable, long-term business. Their product: a novel form of insurance -- for unemployment.
But consumer groups and state regulators have doubts about the policies, which they say may offer far fewer benefits than consumers expect. They may not even pay anything, because of clauses that block payments to those in a strike or lockout, or those who receive severance payments.
Dan Lacey, editor of Workplace Trends, a labor-relatednewsletter in Cleveland, points out that many white-collar workers being laid off these days are asked to sign agreements stating that their departures were voluntary. That would make them ineligible for some of the policies' benefits, he noted.
Stephen Brobeck, director of the Consumer Federation of America in Washington, says unemployment insurance is a "poor value and grossly overpriced."
"Given the economic times, consumers should beware of insurance products like this," said David J. Randal, deputy director of Ohio's Department of Insurance.
Not surprisingly, brokers and companies that underwrite the policies disagree.
"Our view is that there are some fairly fundamental changes occurring in the work force. A whole lot of white-collar jobs will be lost forever," said Walter Tudor, president of National Employment Trust, an insurance company in Richmond, Va.
To qualify for the policy underwritten by Great American Insurance Co. of Cincinnati, a worker must work for the same employer for three years and earn $20,000 or more a year. The cost is $1 a month for every $1,000 of gross salary, so someone with a $50,000-a-year job would pay $50 monthly.
For workers anxious about their futures, there is an older, more widespread form of insurance. It is credit unemployment insurance, and it is underwritten by about 10 insurance companies, according to the Chicago-based Consumer Credit Insurance Association.
Consumers and state regulators have been critical of credit insurance policies as a whole. They contend that the policies are overpriced, return too little to consumers and involve high commissions.
One of the main complaints is that merchants and banks push higher-priced policies, knowing they will get higher commissions.