Insurer tries to terminate 200,000 policies

Click to follow
The Independent Online

The provisional liquidator to the collapsed financial services company Independent Insurance, PricewaterhouseCoopers, will this week seek to terminate up to 200,000 policies held by individuals and companies, but admitted a significant number of policyholders could be better off refusing to cancel.

The provisional liquidator to the collapsed financial services company Independent Insurance, PricewaterhouseCoopers, will this week seek to terminate up to 200,000 policies held by individuals and companies, but admitted a significant number of policyholders could be better off refusing to cancel.

All affected policyholders, including thousands of individuals who bought household and car insurance from Independent Insurance, will receive letters in the next few days.

PwC said the letters would explain that if a policy contained a notice of cancellation clause then the letter should be read as giving that notice.

Daniel Schwarzmann, a partner in PwC's insurance restructuring practice, revealed however that "a significant number" of policies do not contain cancellation clauses and cannot, therefore, be terminated without the holders' agreement.

He said more than half of the contracts that the provisional liquidator wanted to terminate may not contain cancellation clauses but admitted that PwC has not been able to find out the exact number. Mr Schwarzmann said he "wouldn't be surprised" if many such policyholders refuse to come off cover.

Many individuals are paying very cheap premiums for household and motor cover through Independent Insurance and could decide that it is in their interests to keep their policies going and receive a less-than-full payout if they make a claim rather than move to another insurer that would charge higher premiums.

Under current legislation the Policyholders' Protection Board (PPB) must pay compulsory claims, such as those covered by third-party motor insurance, in full. Private individuals with non-compulsory insurance such as household cover are entitled to receive 90 per cent of their claims.

The PPB levies a charge on all general insurers to cover costs when one of the industry's participants becomes bankrupt.

PwC is carrying out an in-depth investigation to try to uncover exactly what went wrong at Independent Insurance. It has already disposed of parts of the business to raise funds. It sold Independent Insurance's loss-adjusting arm, Property and Casualty Services, to Royal & Sun Alliance yesterday for about £3m. The deal preserves 300 jobs. Royal & Sun has also agreed to take over the insurance policies of more than 250,000 council tenants affected by Independent Insurance's collapse.

Mark Batten, a partner at PwC, said yesterday that while many individual policyholders have some protection, corporate customers could be badly affected.

Comments