Insurance claims on unemployment up: OP

Few people protected their finances against illness or unemployment while insurance claims based on unemployment increased significant, according to the OP Financial Group.

As many as 69 per cent of OP Financial Group’s loan customers said that unemployment or long sick leave would make loan repayments very difficult.

Only around 22 per cent of private individuals’ home loans are covered by loan protection insurance, said the OP in a press release on Friday.

Only a third of people in Finland have protected their finances in case of death.

OP customers mention illness and disability as the largest risk threatening their loan repayment ability, and unemployment as the second largest while a rise in interest rates is only the third largest cause of concern.

“Due to a prolonged period of low interest rates, our customers do not think that higher interest rates pose the same threat to their payment ability as illness and disability. If interest rates did rise, the risk would probably rank higher in surveys. This phenomenon was seen, for example, in March 2020 when the brief rise in Euribor rates increased the sale of interest rate caps,” said Anna Niinimäki, head of financial protection for OP’s loan customers.

However, demand for interest rate hedging has grown steadily in recent years. In May 2021, 28 per cent of OP Financial Group’s home loan portfolio was protected against a rise in interest rates, which is two percentage points higher than a year ago.

In January–May 2021, an average home loan was almost 9,000 euros larger than a year earlier, and loan terms were more than nine months longer.

During the same period, the average amount of home loans granted was 109,000 euros and the average loan term 18 years and 6 months. These figures include loans drawn down for renovations and holiday home purchases.

“There’s a lot of regional variation in home loan amounts and loan periods. In the Helsinki Metropolitan Area and growth centres in particular, a home loan is typically double the national average and the loan term may be as long as 25 years. Larger home loans and longer loan terms increase the uncertainty related to interest expenses and personal finances in general,” said Niinimäki.

According to Insurance Survey 2020 by Finance Finland, only around 30 per cent of people in Finland have life insurance, but following the Covid-19 pandemic, a growing number of people are interested in protecting their finances, including in case of death.

The coronavirus pandemic continues to strongly affect the amount of insurance claims based on unemployment.

OP’s loan protection insurance for home loans protects the customer against incidents such as unemployment, disability and death. In 2020, the amount of unemployment-based claims under loan protection insurance increased by 69 per cent year on year. The most dramatic increase was recorded in April–May 2020 following the coronavirus pandemic. In January–June 2021, the amount of unemployment-based claims continued to be 27 per cent higher than a year ago.