The sim may have got wet too or if you reported the phone damaged o2 may have put a block on the account.
Call CS
http://www.o2.co.uk/contactus and check if the account is blocked and if not, request a new sim card, or call into an o2 shop for a new sim.
Take some ID though as usually they will text a code to the old sim to identify you.
I have no affiliation whatsoever with O2 or any subsidiary companies. Comments posted are entirely of my own opinion. This is not Customer Service so we are unable to help with account specific issues.
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