Premium Credit kept an “arm's length” relationship with Independent Insurance and was taken “completely by surprise” by its collapse, the finance company's boss Graham Puttergill said, writes Christine Seib.
Premium Credit's chairman was addressing Insurance Times' second broker briefing last week.
Puttergill said his company's business contact with Independent was entirely electronic, despite allegations that several Premium Credit staff worked from Independent's offices.
He also put paid to rumours that Premium Credit, with 3% of its business coming from Independent, was in financial trouble following the firm's collapse.
“I can confirm we will certainly lose money as a result of Independent's liquidation. In fact, we'll probably be one of the larger creditors,” he said. “It's not life-threatening to Premium Credit but it's certainly painful.”
Puttergill apologised for Premium Credit's inability to provide meaningful information to brokers over the past month and the early letter sent out to policyholders, which was seen by some as aggressive.
“Along the way, we've caused offence to some people,” he said.
Premium Credit wrote to policyholders last week to urge them to cancel their policies and assign their refund from the Policyholders' Protection Board (PPB) to Premium Credit.
Class Law partner Stephen Alexander has said that, instead of assigning the refund to Premium Credit, policyholders could take part in a test case against the finance company under Section 75 of the Consumer Credit Act, which would hold Premium Credit “jointly and severally” liable with Independent.
However, Puttergill said Premium Credit's lawyers did not agree.
He said any action under section 75 against Premium Credit could bring a halt to the PPB's plans to reimburse policyholders.
Personal policyholders will recover 90% of the benefits secured by the policy.
“Where I was brought up, the certainty of 90% was better than the chance of 100%,” Puttergill said.
He warned the inevitable consequence of Class Law's interpretation would be that no finance company would be willing to finance any insurance policies for individuals.
“All of those in this room ought to just stop and consider the implications for their business if they're no longer to offer spread payment facilities,” he said.
Puttergill assured brokers that three and five-year policyholders would only have to pay up to their tenth instalment.
“Once we've received ten instalments in a year, we'll have received from the company concerned the amount that we've paid to Independent,” he said.
