Insurance claims frozen as buyers are sought: The MMI affair

MUNICIPAL Mutual Insurance is suspending the payment of claims for a week while buyers are sought for the saleable parts of the business. However, Prime Health, the medical fees insurance arm, and Prosperity Life, which sold life insurance, will continue to pay claims.

MMI had 500,000 customers with car insurance and another 500,000 with household policies, mostly bought through block arrangements. Some council house tenants were sold contents policies through local authorities which had links with MMI.

The Cheltenham & Gloucester Building Society had 216,000 borrowers with buildings, or combined buildings and contents policies, with MMI.

These were switched yesterday to General Accident which has agreed to take on outstanding claims. Home owners who pay their premiums monthly will be covered under the same terms for the same premiums. A spokesman for Cheltenham & Gloucester said that the September premiums had not yet been handed over to MMI and these would be held 'until the situation is clearer'.

Norwich & Peterborough Building Society has also managed to switch its 22,000 buildings and contents policyholders to another insurer - Norwich Union, which already dealt with other N & P borrowers. Claims already lodged would be dealt with by MMI eventually.

The Automobile Association, which has 80,000 motorists and 300,000 householders with contents insurance partially underwritten by MMI, stopped using it for new business at lunchtime yesterday - before the formal MMI announcement. 'I don't think we are going to see a Vehicle & General-type crash,' an AA spokesman said, 'but we thought it wise to cease renewals.'

The AA's Homesure contents policy is 25 per cent underwritten by MMI. Policyholders continue to be covered and should submit claims as normal. But they should expect some delay in payment.

More than 120,000 disabled motorists, who lease their vehicles from Motobility, a charity approved by the Government, were among those hit by the freeze.

Douglas Campbell, president of the Disabled Drivers' Association, said he feared that some disabled drivers might wrongly believe their insurance policy was not valid and stop using their transport.

He was pressing Motobility to implement an immediate transfer to Eagle Star insurance and to set up a hotline for disabled drivers.

Motobility vehicles being bought through hire purchase and insured individually are not affected.