Insurance shake-up hits policyholders: Sue Fieldman and Maria Scott on the confusion some people are suffering in the face of reorganisation

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The Independent Online
THE shake-out under way in the insurance industry is causing confusion and uncertainty among policyholders whose insurers are reorganising their businesses.

Consolidated Marine and General, one of the main underwriters of loan protection insurance, is withdrawing cover from clients introduced by brokers.

If your mortgage is protected by Consolidated, you have three months to get covered elsewhere.

A spokesman for Consolidated said: 'This is one of the very few mortgage-related schemes we had. Any credit payment protection related to mortgages has been disastrous.'

Loan protection insurance pays the mortgage when borrowers cannot work because of an accident, ill health or unemployment.

Most underwriters of loan protection insurance have been hit for six by escalating claims. Many have tried to cut their losses by reducing benefits and increasing premiums. Consolidated has gone one step further by withdrawing from one sector of the mortgage protection market.

One policyholder, Robert Cook, who is receiving a benefit from his Consolidated policy, was terrified when he received a letter at the beginning of August telling of the company's move because he feared his payments would be stopped.

Mr Cook took out his policy in June 1991 and lost his job in middle-management in February this year. He said: 'Consolidated has given me notice of termination of the policy without explanation, after making only two payments to me.'

But Consolidated explained that while it was no longer able to provide cover in future for policyholders like Mr Cook, it would continue paying benefits already being claimed in accordance with the usual terms and conditions of the policy.

Mr Cook can breathe a sigh of relief.

The outlook is less certain for Nigel Backhurst, a computer consultant who bought a mortgage- protection policy through Alliance & Leicester Building Society.

Alliance transferred its mortgage protection policies from London & Edinburgh to General Accident earlier this year. London & Edinburgh has been raising premiums and the Alliance & Leicester was seeking a better deal to offer customers.

Mr Backhurst paid his pounds 18.93 monthly premium by direct debit from a National Westminster bank account. But towards the end of last year he reorganised his banking affairs before going abroad for a time and arranged with L&E - or so he thought - to switch the debit from his NatWest account to the Yorkshire.

But Mr Backhurst, who is now ill and needs to claim on the policy, discovered this week that there has been a mix-up with his direct debits and his policy has lapsed because premiums have not been paid. He was relying on the pounds 400-a-month benefit to pay his mortgage.

London & Edinburgh says it received no notification of a change in the direct debit arrangements and continued to collect money from Mr Backhurst's NatWest account. Eventually this put him over his overdraft limit and the bank started to bounce the debits.

But he received no warning from London & Edinburgh.

At London & Edinburgh, Terry Stanley, manager of group marketing and corporate relations, said that normally the company would write to tell a policyholder if a payment had been missed. But the day that the company discovered Mr Backhurst's premiums were not being paid was the day the policy was due to be transferred to General Accident.

Mr Stanley said details of the policy and the problem with the payment were passed on. 'It was GA's responsibility from then on.'

GA says it can find no trace of the policy and in any case would not have been able to provide cover if the premiums were not paid.

Alliance & Leicester says it does not believe the society or the insurance companies are responsible because the problem resulted from a cancelled direct debit.

Meanwhile, Orion, known for offering competitively-priced private medical fees insurance, is up for sale, and is looking for a suitable suitor. Policyholders are concerned about the future of their medical fees cover.

A spokesman for Orion was anxious to defuse the situation. He said: 'It is not a question of financial solvency. It is just that we have decided that the UK is not the place to be.

'We are taking on new business and claims are being met. It is very much business as usual.'

Business as usual means a 19 per cent increase in premiums for policyholders from 1 October.

The Orion spopesman said there were 'several parties' interested in buying the company. However, he admitted that if a suitable suitor was not found then there would be a 'run-off situation' where claims would be handled but policies would not be renewed.

Orion is a sizeable player in the medical fees market. If it does withdraw, thousands of people will be looking for alternative cover.

Then the real problem arises - finding a company that will take you on with your existing conditions.

David Worth of The Medical Fees Insurance Agency said: 'If you have an existing condition a new company would probably take you on but you could not claim for medical advice or treatment for those conditions for two years.'

(Photograph omitted)

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