Move policies from Independent - fast

About 500,000 people with motor and household insurance policies at the collapsed Independent Insurance are being encouraged to move their policies rapidly to other insurers.

Most of these policies were set up through brokers, and those brokers are now being advised to buy replacement cover from other insurers. The British Insurance Brokers Association advises brokers on its website to 'recommend immediate replacement of cover'.

It seems likely that the insurer, which is now in provisional liquidation, will go into full liquidation this summer, and will itself then tell any remaining clients they need to buy new cover.

But there is some good news for customers: the Policyholders' Protection Board (PPB) has agreed to pay 100 per cent of all third-party motor insurance claims and 90 per cent on household and most other policies. The PPB agreed this last week,though theoretically it still could still exercise its discretion not to meet all such payments.

A PPB spokesman said that claims made now might take 'two to three months' to pay out. 'We can't go paying out money left, right and centre,' he said, adding that much legal paperwork has still to be completed with accountant PricewaterhouseCoopers, the provisional liquidators of Independent Insurance.

Mortgage broker John Charcol has moved nearly all of the 2,200 household insurance customers to other insurers. Royal & SunAlliance is expected to communicate this week with 250,000 council house tenants whose contents policies are being moved to it from Independent Insurance.

Letters are expected to go out from the brokers who placed the insurance with Independent, telling policyholders about the switch and saying they do not need to take any action themselves.

People who pay premiums by regular monthly payments can switch cover fairly easy. It is harder for people who may have paid upfront for a year. Getting a refund on premiums already paid could be problematic.

The failure of Independent has come as a shock to the insurance world, which had hoped that several tiers of regulation would have prevented such sudden collapses. Both the Financial Services Authority and the Serious Fraud Office are launching investigations.

Independent is running a helpline for concerned customers on 0161 741 1010.