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Increasing Demand for Loan Repayment Coverage

Bank customers taking on new mortgages are bracing themselves for possible unemployment by asking for loan repayment insurance. Information obtained from banks by YLE indicates that purchases loan repayment insurance have held steady since last autumn.

Asiakasneuvontaa Nordean konttorissa
Image: YLE

However, repayment coverage that includes unemployment insurance for loans has become more popular among mortgage holders.

“Interest in the unemployment coverage has increased since last autumn, because of the worrying developments in the unemployment situation,” explained Mikko Hyttinen, Director at Osuuspankki Centre.

Nearly half of all loan products from Osuuspankki include some kind of repayment coverage in case of death, illness, unemployment or disability.

“About seventy percent of our loan insurance products include unemployment coverage,” said Hyttinen.

Demand Varies From Bank to Bank

Sales of loan repayment insurance differ among banks. Osuuspankki and Sampo Bank sells some kind of loan protection product with roughly fifty percent of home loans. Nordea and Aktia sell the product for twenty percent of home loans.

Nordea Bank says it has sold few policies that include unemployment protection, but adds that interest in that quarter is increasing.

“Last year, perhaps about five or six percent of loan customers have asked for unemployment protection. Interest has nearly doubled, although overall numbers with this kind of protection remain low,” said Nordea Bank Director Jussi Mekkonen.

Mekkonen added that sales of coverage have remained moderate because the instruments have been quite costly compared to the risk.

Officials at Aktia Bank have also observed an increased concern with the threat of joblessness.

“Since last autumn interest in loan security has jumped and in some cases it has been purchased more than before,” said Erno Kiukkonen of Aktia.

Aktia and Ossuspankki officials say that claim payments have also increased as a result of the layoffs, but would not disclose more precise information. Mekkonen said that few Nordea customers had filed compensation claims.

“For the moment we are speaking of only isolated cases,” he added.

Sampo Bank would only say that “the unemployment coverage payouts have kept pace with growth in unemployment figures”.

Sources: YLE

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