U.K. Guaranty Fund Had 41,000 Insurance Claims

Bankrupt insurance firms accounted for most of the claims made good on in 2004/05 by the United Kingdom fund, which secures the operations of financial services firms.

The statutory fund, titled the Financial Services Compensation Scheme (FSCS), said ?113 million (U.S. $198 million) was paid for claims relating to insolvent insurance firms, notably Independent Insurance and Chester Street.

The FSCS said insurance claims are usually handled by the appointed run-off agent and presented to FSCS for checking and payment and that 41,104 payments were made in 2004/05.

Overall, the fund paid out almost ?175 million (U.S. $306.6 million) to consumers in 2004/05, according to figures published in the FSCS's annual report today.

The fund pays customer claims if an authorized financial services firm is unable, or likely to be unable, to pay claims against it.

On insurance contracts, FSCS pays 100 percent of the first ?2,000 of a claim or policy, plus 90 percent of the remainder, with no upper limit. Compulsory insurance contracts (for example third-party motor insurance) are protected in full. These limits also apply to business conducted on or after Jan. 14, 2005 by insurance brokers.

Commenting on the annual report, Loretta Minghella, chief executive of FSCS, said: "FSCS plays a vital role in protecting consumers and maintaining confidence in the industry. Without our help thousands of consumers would have nowhere to turn. Last year was a challenging one for the Scheme as we experienced a large increase in claims and inquiries, particularly in relation to investments.

"We are streamlining our processes and reducing waiting times where we can, while controlling costs as much as possible for those firms that fund the Scheme. With large increases in claims coming to us, some claimants are waiting longer for a decision on their claim than we would like. We are therefore prioritizing those cases where consumers are suffering an immediate financial loss, and taking measures to reduce turnaround times generally for all claims."

FSCS also reported that 286 firms were declared in default during 2004, bringing the total number of firms in default since Dec.1 2001 to March 31, 2005 to 2,490.