The Financial Ombudsman Service (FOS) recently upheld a complaint by “Miss J” over an insurance company’s refusal to pay her unemployment insurance after she was made redundant.

Miss J was employed by a large high street retailer. When she took out a new credit card, she also took out Payment Protection Insurance (PPI) to cover the monthly payments on the card if she became unemployed through sickness, disability or redundancy.

At the time there had been some media coverage on her employer going through a difficult period, but she had no reason to think that her job was under threat. However, a few weeks later her employer announced that it would be consulting on possible job losses, and eventually Miss J was selected and made redundant.

When she attempted to make a claim on her policy, the PPI underwriters turned down her claim on the grounds that the PPI terms excluded claims if the policyholder became “aware of any increase in the rick of unemployment” within 90 days of the commencement of the policy. She then complained to the FOS.

Her complaint was upheld. The FOS stressed that, when she took out her policy, Miss J had no particular reason to believe that she was at risk of being made redundant. The FOS stated that if the insurer wished to remove cover if because a policyholder’s knowledge or circumstances changed within the first three months of the policy, then it would have to word this very clearly.

They should also have set out exactly what kinds of change would be excluded by the policy, and ensure that sure the consumer was made aware of it when they bought the policy. This had not happened in this case.

While the FOS accepted that the insurer needed to protect itself against people applying for cover when they suspected they were going to lose their job, it held that the exclusion in this case was so broad and unspecific that it was unfair.

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