Customers' long wait to recover money

Reader John Lewis had waited 18 months to recover £6,500 from his insurance claim on his home's subsidence. Days after contacting The Independent asking for help he was paid, but it seems that dozens of other people are waiting many months for thousands of pounds on claims which are being unnecessarily delayed.

The problem is the extremely slow pace in sorting out the financial affairs of Independent Insurance – no relation to this newspaper – which went into liquidation in June 2001. At that point Mr Lewis had already had some remedial work carried out on his house, with the then functioning Independent Insurance paying. But until now nothing had been repaid for his intervening thousands of pounds in payments to the builders.

By the end of last year, Mr Lewis was distressed and fed up with not getting his money. Normally with a subsidence claim, the insurer will appoint a loss adjuster and a surveyor to act as project manager, and will make payments direct to the contractor. For Mr Lewis – and many other Independent Insurance customers – that option was not available without a functioning insurer. He had to pay the contractors from his own money and wait for reimbursement.

Because Independent Insurance has gone bankrupt, its customers are not able to fully recover money due to them from claims. Instead, they are entitled to 90 per cent of the claim's value (after deducting the policy's excess, usually £1,000), which is recovered from the Financial Services Compensation Scheme (FSCS) and paid for – indirectly – by other insurers.

In the case of Independent, this claims processing is proving extremely slow. Mr Lewis says that in his numerous phone calls to Aurora – the new name for Independent's claims-handling division – he was given a variety of explanations about the delays and told that payment had to be approved by the FSCS. But the FSCS told him they could do nothing without Aurora approving the claim.

"It's a hell of a process that should have been straightforward, and I was only paid after your newspaper intervened," says Mr Lewis, a retired florist who lives in Welwyn, Hertfordshire. "It was the only time I ever got any response." Mr Lewis believes that problems were compounded because the loss adjuster, Property and Casualty Services, had been part of Independent, rather than a neutral party.

As well as contacting us, Mr Lewis also complained to his MP, Melanie Johnson, who is Parliamentary Under Secretary of State for Competition, Consumers and Markets at the Department of Trade and Industry. She wrote that she had been advised that a delay had been caused by checking that his premiums had been up to date when Independent went into liquidation – which they were.

The liquidators of Independent are Mark Batten and Dan Schwarzmann, partners at the world's largest accountancy firm, PricewaterhouseCoopers. One call to PwC was sufficient to have Mr Lewis's claim resolved. But repeated calls to PwC have failed to obtain any explanation for the delays.

However, a spokeswoman for the FSCS said: "Claims are processed by Aurora, which processes so many claims a month. It provides us with a total, FSCS pays Aurora, which then pays the individual. Our turnaround is five days and we have no backlogs. Any backlog is where the claims are being processed. My understanding is that all hardship cases have been handled. But there are about 150,000 people with return of premium claims, which will take years to sort out."

She added that she was told by Aurora that in Mr Lewis's case he had been in dispute with the loss adjuster last year over the total due to him. Mr Lewis says that he is unaware of any such dispute.

Not that Mr Lewis is by any means unique in his problems. An insurance broker, who asked not to be identified, said: "I have about a dozen clients still waiting. One of them is owed about £55,000 for subsidence, going on for two to three years. We know that these things take time. We thought a year was reasonable, but what is irritating is the way the buck is passed down the line." He accuses the liquidators of "prevaricating" in processing the payments and argues that Aurora – which is currently being sold as a going concern – is understaffed.

Yalkin Tanyar, a businessman who lives in Cuffley, Hertfordshire, is another Independent Insurance customer annoyed to be waiting so long for payment on his subsidence claim. He is due about £15,000. After his case was taken up by us he has also been cleared for payment, subject to confirmation that he was up to date on premiums. But as Mr Tanyar asks, why would his claim have been processed this far if he was in arrears on payments? "I have hardly claimed in 15 years, but I must have given them [Independent Insurance] hundreds of thousands of pounds [in premiums]," he adds.

Mr Tanyar was also told that even after his claim was approved it would take another four to six weeks before it was credited electronically to his bank account. However, after we talked to the FSCS, he was promised that payment would be completed this week.

The troubling question is just how many more Independent Insurance clients are waiting for their money and how long it will take before they receive it. It is a question that PricewaterhouseCoopers does not seem keen for us to learn the answer to.