When insurers collapse...

By DAILY MAIL REPORTER
Updated: 19:00 EST, 27 June 2001

THE collapse of Independent Insurance last week stunned its 600,000 policyholders, who were left in limbo and sometimes severely out of pocket. So far, the only good news is for 250,000 council tenants who have been taken on by another insurer, Royal & SunAlliance, but most of the remainder are still left to fend for themselves.

The events of the past week have exposed severe weaknesses in the system designed to protect customers when their insurance company goes bust. Unpaid builders have walked off jobs, displaced householders have been unable to pay for rented accommodation, outstanding claims were thrown by the wayside, and policyholders are being forced to continue paying premiums for worthless insurance or face legal action and even debt collectors.

Victims of the insurer, desperately seeking advice, have been pushed from pillar to post by Independent, its provisional liquidator PricewaterhouseCoopers (PwC), trade body the Association of British Insurers and the Policyholders' Protection Board (PPB), which is in place to help consumers.

Customers could be faced with the stark reality of having to wait for up to a year for claims to be settled. And unless the PPB decides that Independent customers can have the premiums they have already paid refunded to them, they will be well back in the long list of creditors. However, the board has only a handful of staff and seems ill-equipped to deal with such an enormous disaster.

The PPB, funded by a levy on the insurance industry, should leap into action as soon as an insurer collapses, but so far it has managed only a crawl. The insurance industry, it seems, has left the PPB severely under-resourced to deal with a disaster of this magnitude.

And with PwC set to announce job losses at Independent, policyholders can expect service only to deteriorate further.

What's happening now?
PwC wants to avoid liquidating Independent and set up a Scheme of Arrangement. It says this should allow creditors to be paid quicker and cut down on substantial costs and fees associated with lengthy liquidations. However, little has actually been done to inform and help the bulk of policyholders.

Builders down tools
DESPERATE policyholders have told of being thrown out on to the streets because Independent cannot afford to pay rent money to families waiting for their homes to be repaired after fire and flood, and pay contractors' fees to carry out the work.

If you are a priority case, the PPB can step in and issue money immediately. It has discretion to deal with all serious cases first. But to receive the cash, you will need to be persistent and make sure Independent has put your case at the top of the list.

Priority cases include those who are homeless. If you are one of these, call PwC to explain the severity of your case. They can then retrieve information from Independent and pass it on to the PPB.

Direct debits
CUSTOMERS have been urged by PwC to cancel policies immediately. But an oversight has meant up to 100,000 customers who pay for their insurance by direct debit each month are being told they must pay up the remainder of outstanding money to a company called Premium Credit Limited.

In some cases people have unwittingly signed up to three-year agreements, costing hundreds of pounds.

A letter being sent out to customers says: 'If you default under the terms of the loan agree-ment, the entire loan becomes repayable immediately, and in the event of non-payment we will have no option but to take appropriate legal action to recover the sums due to us.' The latest advice from PwC is to consult your broker if in doubt.

Most people paying by direct debit did not realise they had signed up to a consumer credit agreement. Bank statements show payments being made to Independent, not Premium Credit. Refunds on premiums are far from certain as this is left to the discretion of the PPB.

Making a claim
THE SAFETY net in place for customers of failed insurers making claims is the Policyholders' Protection Scheme (PPS), run by the PPB. You will receive 100% of outstanding claims on compulsory insurance policies (third-party motor and employer liability cover) but only 90% on non-compulsory claims (home and buildings insurance).

Businesses will be covered by the PPB only for employers' liability insurance. Any outstanding non-compulsory claims mean you'll have to join the list of creditors.

Claims should be submitted to Independent's claims department. The information is then passed to the provisional liquidators PwC, who will calculate how much you will get.

The details are then passed to the PPB, which issues the cheque either direct to the policyholder or to the insurer's claims department to pass on. Neither policyholders nor brokers should contact the PPB with any queries. There is a helpline on 0161 741 1010, but expect long delays. Existing cover will continue but will be restricted.

Victims of the collapse
DAVID, 38, and Haley Saul, 36, suffered damage of £70,000 when floods crashed through their home in Nazeing, Essex, last October.

They were forced into rented accommodation costing £1,800 a month, but now Independent has folded the insurer has stopped paying their rent and the builders' fees to carry out the repairs to make their house habitable. Mrs Saul says: 'We were in real trouble because our rent was due in a few weeks, but we couldn't afford to pay. I phoned the helpline but they couldn't offer any assistance.' In sheer desperation, Mrs Saul, a business consultant, made repeated calls to her contents insurer, Abbey National, which finally agreed to cover the rent for only two more months.

The Sauls are working closely with the original loss adjuster who investigated the flood damage to the house.

He is negotiating with PwC to ensure they are put on the hardship list, which may mean a cheque is issued faster to cover any more rent and pay builders to finish work to the house.

Has Independent crash hit you?

The collapse of Independent Insurance