People in work perceive the labour market as increasingly ‘risky’ but most still think that their jobs are secure. Should they lose their jobs, many are still confident that they would be able to cope, says a report of a three year research project into how families manage risk funded by the Economic & Social Research Council.

Confidence in maintaining one’s job was high. Only 11 per cent of over 1,000 people in work in one survey thought that they might lose their job within the next 12 months. The vast majority was correct in this prediction, but two in three of those that had been made unemployed had failed to foresee the event. This was somewhat worrying since "the ability of individuals to assess their situation in an informed manner is one of the central assumptions currently underpinning the shift from state welfare to private insurance", say the researchers. Furthermore, the research concluded that private insurance in the event of unemployment is not yet a viable alternative to state support for most people.

Data sources for the research conducted by a team from the Centre for Research in Social Policy at Loughborough University and the Centre for Housing Policy at the University of York included the Omnibus survey and the British Household Panel Survey, which were followed up one year later. Six focus groups and over 100 face-to-face interviews, some with people who had recently experienced unemployment, provided further insight.

The people who were most acutely aware of the possible implications of losing their job were single earners, and low-income, dual-earner households with dependent children.

People had various strategies in mind in the event of losing their job. They included:

• if one partner was made redundant, the other – particularly if female – said they would seek work or increase the hours that they were working;

• people said they would realise savings or financial investments – this was mostly among dual-income households in skilled or higher occupations;

• unemployment insurance to cover income loss or mortgage costs was a possibility, although people were often deterred by cost, concern about value for money, or had negative attitudes towards insurance.
  

People’s attitudes towards who should provide protection – the state or private insurance, or a mixture – varied. Those who endorsed private provision in principle often did not put it into practice, often because they could not afford to or they were not confident that it would be effective.

Others, meanwhile, who supported the state solution nevertheless took out insurance, mostly mortgage protection (MPPI), which was the most accessible and popular of the policies designed to cope with unemployment. These people did not think that the state would meet the financial demands that they would have to meet. They tended to be better off, more risk averse and had more positive attitudes to insurance.

But the researchers found that private insurance did not deliver the money at all for some people who lost their jobs and, even when it did, there were frequent delays. People interviewed for this study had claims rejected mostly because the claims were more complex than those that the insurers did accept. Difficulties arose, for instance, when unemployment and sickness coincided. Some claims were rejected after insurers contested claimants’ accounts of the circumstances of their unemployment. Even successful claimants sometimes found themselves with arrears because the insurers did not pay out immediately.

"There is a fundamental tension between it (private insurance) and its ability to respond to the nuances of a flexible labour market", concluded the research team.

A key consideration on the extent that private insurance currently can substitute for the state is that some 20 per cent of the working population at any one time is likely to be excluded from the market, often because they are young with short employment histories. These people may well be middle income earners and keen to take out insurance.