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Sunday 25th of April 2010
August 4, 2009    

“Weasel” banks dishonouring redundancy insurance

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by David Masters

One in six redundancy insurance claims are being rejected by banks and insurance firms, it emerged this week.

People reeling from being made redundant are being dealt this extra blow because of “weasel exclusions” in the small print of their policy, or because the policy was mis-sold originally.

Prior to the credit crunch, banks and insurance firms earned up to £6 billion per year selling redundancy insurance, which covers the claimant against repayments on loans, mortgages, and credit cards if they lose their job.

However, as unemployment soars, an increasing number of policies are not being honoured.

Vince Cable, Liberal Democrat Treasury spokesperson, condemned the banks’ behaviour as “outrageous and unforgivable”.

“The same banks that profited from selling the insurance products are now potentially making these families homeless by dishonouring the policies,” Cable said.

The financial ombudsman now receives 30,000 complaints a year against financial providers refusing to pay redundancy insurance, up from 2,000 three years ago.

Around nine out of ten complaints are upheld by the ombudsman.

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