Rubbish uncollected as insurance policies end

LOCAL authorities took emergency measures yesterday as Municipal Mutual Insurance struggled to meet its commitments to thousands of private and council policy holders.

Payment of claims on household and motor insurance were being delayed and some authorities were forced to suspend certain services.

Exeter City Council's policy expired at noon. Its vehicle fleet was taken off the road and rubbish was uncollected. The Lord Mayor had to walk in formal robes to an engagement when her official Daimler was immobilised. The civic centre, Guildhall, swimming pool, playing fields and municipal golf course were closed. Rental dustcarts will be used to empty some bins today.

Dustcarts in Braintree, Essex, were kept off the road until the council found alternative cover. In Monmouth and parts of Bedfordshire, no bins were emptied; Huntingdon had no recognisable municipal life until the afternoon, and Sheffield was seeking new fire cover.

Representatives of British local councils, 85 per cent of them insured through MMI, said alternative cover was available on the insurance market while 'constructive' talks with MMI and the Department of Trade and Industry continued. Claims would be met, although the company was unlikely to survive in its present form. Household and motor policies remained valid.

Martin Pilgrim, a finance expert for the Association of Metropolitan Authorities, said: 'The fact that our insurance company is in trouble shouldn't worry people who have a claim against the council. It's the council's worry not the public's'

The public will foot the bill in the short term with a hire car for the Lord Mayor of Exeter and in the longer term with higher council tax to pay increased premiums.

MMI plans to transfer its personal motor and household insurance business to other insurers. It then hopes to get back to its main business of offering insurance to councils.

The likely level of claims from the personal business will be easier to estimate, so this transfer will leave MMI with its largest and most unpredictable liabilities. If MMI is to continue without an injection of fresh capital, local authorities will have to accept steep rises in premiums, reduced payouts and/or accept more of their own risks. Another alternative would be a creditors' scheme of arrangement - a move favoured by the council associations - which would allow MMI to resume the payment of claims while avoiding the costs of a liquidation.