Norwich Union has pulled some of its best-selling unemployment cover products amid concerns the looming recession will leave it inundated with claims.
Other leading insurers could follow Norwich Union's lead and withdraw unemployment-only cover.
Premiums for this type of insurance have increased 17 per cent in the past year.
Norwich Union no longer offers unemployment-only cover available through its partnerships with Paymentshield and Select & Protect. And it does not rule out doing the same to other partnerships.
Norwich Union's cover pays out to workers who are made redundant and covers their mortgage payments for up to 12 months.
Unemployment is rising at its fastest rate for 17 years and is heading toward two million in 2008 and 3 million in 2009.
The unemployment-only cover offered through Paymentshield is underwritten by Norwich Union and is no longer available. The Paymentshield deal is believed to be one of Norwich Union's biggest partnerships.
Paymentshield is still offering accident, sickness, and unemployment cover, underwritten by Norwich Union.
This is fuel for those who believe that as soon as there is something that people really need cover for, some insurers run away in fright.
The good news is that there are still markets out there offering unemployment cover either on its own or with accident and sickness cover.