Angry policyholders are up in arms over missing cash resulting from the failure of Ward Evans.
Policyholders had bought three-year New India policies through Ward Evans.
New India accused Ward Evans of "unsound underwriting practices".
Now Ward Evans' new owners, Giles Insurance Brokers, are hurrying to find alternative cover for the policyholders affected.
In 2001 Ward Evans sold three-year commercial policies using a binder with New India.
It is understood New India was hit with several large claims and, noticing the policies were "grossly under-rated", cancelled Ward Evans' agency.
"The problem New India has is that it is not happy with the underwriting approach taken," said a source.
"The policies were cancelled and the premiums were returned and pocketed by Ward Evans."
Some policyholders have not received their money back and are paying premium finance deals for the non-existent cover.
One policyholder in the construction industry paid Ward Evans £28,000 for a three-year policy with New India in June 2001.
In June 2002 Ward Evans told the client that New India did not want to continue with the deal because of hardening rates.
The policyholder said Ward Evans promised that his two-year unused premium would be returned.
"From June to November, I contacted them about the money, but they said they were still in negotiation with New India," he said.
Ward Evans organised finance for the original three-year premium with Close Premium Finance.
The policyholder stopped making repayments to Close soon after his policy was cancelled, but is now being pursued by Close for the outstanding balance.
"I felt I had no value for the money I'd borrowed from them," he said.
A source at New India confirmed Ward Evans' agency and the policies were cancelled after a disagreement over rates.
Giles chief executive Chris Giles, who purchased Ward Evans with his broker Nick in December 2002, said he was re-placing New India policyholders as quickly as possible.
"We weren't involved when the agreement between Ward Evans and New India was struck and we're having difficulty finding agency files for certain insurers," he said.
A Close spokesman said he could not discuss individual cases.