MMI customers wait for news: Vivien Goldsmith on the latest arrangements for policy-holders

THE MILLION individuals insured with MMI and a further 250,000 covered by its Prime Health medical arm are still uncertain about the future of their insurance.

MMI announced at 5pm on Wednesday that it was taking on no new business and was suspending payment of claims. But Prime Health is still accepting renewals and continuing to pay claims.

Behind the scenes the health, motor, household, life and unit trust divisions of MMI are being hawked around potential buyers.

But in the meantime the main brokers and building societies that sold MMI policies to their customers are making alternative arrangements. As a last resort the Policyholders Protection Board, which was created in the mid-Seventies after the collapse of Vehicle & General, will pay the bulk of claims if an insurance company goes into liquidation. It pays 100 per cent of legally necessary insurance, such as third party cover for motorists, and 90 per cent of other claims by individuals or partnerships. Limited companies are not covered by the board.

But the AA, which has 80,000 motorists covered with MMI and a further 300,000 householders with contents insurance partially underwritten by MMI, has said that in the event of a liquidation and payouts from the board, it will make up any shortfall.

An AA spokesman said: 'We are telling customers that their policy remains in force. MMI has not gone bust. Anyone concerned about their policy should contact their local AA shop.'

The AA has been reassuring worried motorists that they can still drive their cars. But in the event of a claim there is inevitably going to be some delay beyond the seven-day moratorium called last Wednesday.

Swinton Insurance, which has 2,000 customers insured with MMI, has set up a hotline - 061-236 1222 - which will operate from 10am to 4pm over the weekend. A spokesman said: 'We still hope that there will be a sensible solution to the difficulties.' But it has Sun Alliance on standby to provide cover if MMI fails. 'We are not cancelling policies,' the spokesman said, ' and we are not encouraging anyone to cancel their payments.'

Some block policies have already been switched away from MMI.

Cheltenham & Gloucester Building Society has moved its 216,000 borrowers with MMI buildings or buildings and contents insurance to General Accident, which has agreed to take over the payment of outstanding claims that would normally be lodged against MMI.

Norwich & Peterborough Building Society has moved its 22,000 customers with MMI insurance to Norwich Union, which already dealt with some of N&P's borrowers. But Norwich Union will not be taking on any pending claims.

Endsleigh Insurance has 25,000 clients with MMI, mostly with motor policies. It is telling customers who are worried about cover to visit branches. As policies come up for renewal they are being placed elsewhere. 'Naturally we are actively looking to move the whole scheme,' George Spragg, marketing manager, said. 'But we have to remember that the company is not insolvent, although we are keeping in touch with the DTI. One doesn't want to have a panic and cause the collapse.'

Most insurance policies are annual contracts, even though they may be paid on a monthly basis. Cheltenham & Gloucester's policy was, unusually, a monthly contract, and the society was thus able to cancel at the end of September and make a clean break.

(Photograph omitted)