Premium Credit has invited Independent Insurance's policyholders to cancel their policies and avoid paying any further instalments.
However, Class Law partner Stephen Alexander has warned people that if they cancel under Premium Credit's terms, they will lose the right to claim back the unpaid part of their yearly premium from Premium Credit.
Alexander said, under Section 75 of the Consumer Credit Act, Premium Credit and Independent Insurance were “jointly and separately liable” because, if the policyholders had known the extent of the company's troubles, they would not have signed the deal.
He said if enough policyholders took part in a test case against Premium Credit, the case would cost very little.
“It depends on how many people take it up,” he said.
The Premium Credit letter is below:
“We are writing to you in connection with the Independent Monthly Instalment Plan, the method by which you elected to pay for your insurance policy, and the uncertain position created as a result of the provisional liquidation of Independent.
It is our understanding that you should soon receive a communication from the Provisional Liquidator regarding the cancellation of your insurance policy. If your policy has a clause that allows it to be cancelled mid-term (and this should apply to most individuals) the Provisional Liquidator intends to cancel the policy. In these circumstances, or if you have already cancelled the policy
