INDUSTRIAL ASSURANCE AND FRIENDLY SOCIETIES BILL. (Hansard, 10 May 1948)

§ THE MINISTER OF CIVIL AVIATION (LORD NATHAN)
My Lords, I beg to move that this Bill be now read a second time. It is in its nature a tidying up Bill: to tidy up the position resulting from the National Insurance scheme, to tidy up the Bill by making clear certain obscurities in law and practice, and tidying up so as to bring into being a number of desirable, if unspectacular, reforms in the way of administration. Before explaining what the Bill does, I propose to say a word or two about the proposal in the Beveridge Report that the business of industrial assurance should be converted 728 into a public service under an Industrial Assurance Board.
This proposal, your Lordships will recall, was put in brackets in the Report as not being essential to the whole of the rest of the plan for social security. It was intentionally omitted from the various White Papers indicating the line which the then Government proposed to take on the Report, largely because it was felt that the work involved in bringing the plan for social security on to the Statute Book and into operation was of such formidable dimensions that it was undesirable to encumber it with anything not essential to the main scheme.
That is the view of the Government today. The question whether the whole of this business of industrial assurance should or should not be nationalised remains a question for consideration, and the Government are looking into it. For the time being, the Departments concerned will have enough on their hands, and we think the wiser course is to restrict the present Bill to those reforms of industrial assurance which are necessary to the proper working of the death grant in the National Assurance Act. The present Bill in no way prejudices the decision which the Government may in due course take on the bracketed proposal in the Beveridge Report.
Having said that, let me proceed to tell your Lordships the two main reasons why the introduction of a State death grant makes legislation necessary. The first reason relates to policies on the life of another. As is generally known, in ordinary life insurance a person is not normally regarded as having an insurable interest in the life of anyone but himself and his spouse. But in industrial assurance, which means life insurance on which premiums are payable at intervals of less than two months (in practice, generally weekly) and are received by collectors, it is lawful to insure money to be paid for the funeral expenses of a parent, child, grandparent, grandchild, brother or sister. The industrial assurance offices have construed this power as enabling them to insure the lives mentioned for an amount that would be reasonable for funeral expenses, and to pay that amount to the policy owner on proof of the death of the person assured, without inquiring whether the policy owner has met or will have to meet the funeral expenses. There are weighty grounds for 729 doubt whether the offices, in so proceeding, are not exceeding their powers.
The matter has never been tested in the courts, and I certainly would not suggest that it would be profitable to-day to go into the legal arguments on which this doubt is based, or into the reasons for which successive Industrial Assurance Commissioners have refrained from putting the matter to the test of prosecution. Suffice it to say that the doubt exists, and has never been resolved. What is important to-day is that, if the legality of the practice of the offices is already open to doubt, it will become still more so when a death grant has been provided as one of the benefits of the National Insurance scheme. It is not satisfactory that a large volume of business should be conducted on an uncertain legal foundation, and the Government have decided that the time has come when the position must be cleared up.
The second reason for legislation is to maintain the limits on the sums payable on the deaths of children under the age of ten. For reasons that will be obvious, the law limits the sum that may be insured to be paid on the death of a child under the age of ten, whether the insurance is taken out in the child's name or in that of the parent. The limits are £6 for a child dying under the age of three, £10 for a child dying under the age of six, and £15 for a child dying under the age of ten. From July 5, 1949, death grant up to these amounts will be payable under the National Insurance Act, subject to contribution conditions, on the deaths of children born on or after July 5, 1948. Consequently there will no longer be room for voluntary insurance in these cases. That is the main purpose of the Bill—to deal with the matters to which I have just referred.
Let me draw your Lordships' attention to some of the operative clauses of the Bill. To begin with, Clause 1 of the Bill terminates all the existing powers of industrial assurance offices and friendly societies to insure money for funeral expenses. Clause 1 having wiped the slate clean, we now consider what powers, if any, ought to be given to insure the life of another; what relatives should be insurable and for how much. The Government think that as only one death grant will be payable on any death, and as more than one person may have to incur 730 expenses in connection with a death (not only mourning clothes, now rather going out of fashion, but also travelling expenses, and loss of remunerative time) it is reasonable that limited voluntary insurance should continue to be permissible. It would be logical to restrict these insurances to the contingency of the policy owner surviving the life assured.
When a policy survives its owner, premiums on the policy may continue to be paid by someone who is not entitled to the benefits assured. When that happens, and it is found, on the policy maturing, that the person entitled to the benefit is not the person who has been paying the premiums, a troublesome dispute may arise. It is not practicable to avoid this trouble by a legal requirement as to the terms of policies, but we propose to get rid of most of it by restricting life-of-another insurances (apart of course from those on husband or wife) to relationships in which the life assured belongs to an older generation than the proposer of the assurance—that is, to parents, stepparents and grandparents. This would mean cutting out assurances in life-of-another form on the lives of children, and those on brother or sister. We think we can do this because we have, in any case, to stop assurances on children under which payments are due on death under age ten. Other assurances on children can be taken out in own-life form—that is, in the name of the child itself—and We do not think that any serious inconvenience need result from stopping assurances on children's lives in life-of-another form.
Accordingly, we propose that insurance on the life of another should be confined (again apart, of course, from husband and wife) to insurances on the lives of parents, step-parents or grandparents. We propose to limit the amount of such insurance to a modest sum. The amount originally proposed was £15, but this was raised to £20 during the Committee stage in another place. This amount is to be exclusive of bonuses other than guaranteed bonuses. We also propose that, as the purpose of allowing these policies is to enable the policy owner to meet his personal expenses in connection with the death or funeral of the life assured, rights under these policies shall not be assignable. There is to be one exception to this. A policy owner who is in financial difficulty may get someone else 731 to pay his premiums for him; if so, he can assign the policy to the extent of the premiums so paid. That will be the limit of assignability. One of the powers to be terminated by Clause 1 is the power of a registered friendly society to insure a member's husband or wife for funeral expenses. Clause 3 substitutes for this a power to insure the husband or wife of a member without limit other than that applying generally to insurances by friendly societies. The reason for treating this form of insurance thus is that in ordinary life insurance husbands and wives are regarded as having an unlimited insurable interest in each other's lives.
With Clause 5 we come to the first of the changes not connected with the introduction of death grants under the National Insurance scheme. The Government have been asked to raise the limits on the amounts for which friendly societies may insure. Those limits are now £300 on the gross sum and £52 on the annuity. They date from 1908, and it seemed to the Government that there was a good case for increasing them, so Clause 5 raises them to £500 and £104 respectively. A friendly society which is debarred, either by Statute or its own rules, from insurances of more than £300 is exempt from income tax. Clause 5 does not increase the limit of tax exemption, because that limit can be increased only by a Finance Bill. The Finance Bill includes provision to raise the exemption to £500 and the operation of Clause 5 is to be delayed until the increased exemption limit comes into operation. Clause 6 deals with insurances on children's lives. Under Clause 1 it will cease to be lawful to insure one's child's life in life-of-another form, but it remains to deal with insurances taken out in own-life form. Clause 6 provides that nothing except a return of premiums can lawfully be paid on the death before age ten on or after July 5, 1949, of a child born on or after July 5, 1948. These dates are so arranged that the new provisions will dovetail in with those of the death grant.
I have drawn your Lordships' attention to the more important provisions of this Bill. The rest of the measure is concerned with administrative and consequential matters. Naturally I am at your Lordships' disposal to go right 732 through the clauses if you so desire. I hope, however, that I have said sufficient to indicate the main purposes of the Bill, and it only remains for me to commend the Bill for a Second Reading in your Lordships' House. I beg to move.

§ LORD LLEWELLIN
My Lords, as the noble Lord has told us, this is in the nature of a tidying-up Bill. At the time of the passing of the National Insurance Act everybody must have contemplated that some measure of this kind dealing with death grants would certainly be necessary. The noble Lord has told us that the Bill in no way prejudges any decision at which the Government may have arrived in regard to making this form of insurance, which is still allowed, a business to be taken on by the State. I hope that at any rate these additional death grants, and other things of the sort, will be left to other bodies, because a State scheme, such as the one we have hitherto known, always seems to me to apply matters universally. Speaking solely for myself, I may say that I am content not to pay more than the 6s. 2d. which I am told that as a self-employed person I shall have to pay after July 5; and I certainly do not want to have to insure other people in addition for any grants supplementary to the £20 funeral expenses. A funeral may well cost more than £20, for all I know, but, for my own part, I should be quite content with a funeral costing only £20! One of the unnecessary things on which money is often spent in this country is a too-expensive funeral.
I do not think the Bill will meet with any opposition in this House. It modernises the position of the friendly societies, and, at the same time, I am glad to say, maintains it. Many attacks have been made upon some of the bodies who effect this kind of insurance, largely as a result of a number of lapsed premiums and matters of that kind, for which I do not think the societies themselves have been responsible. However, we must realise that the whole of this system, which has been one of mutual assistance to people of small means since it was started in this country, has been of great advantage to a large section of the community. It has been followed with 733 equal success in a number of the Dominions. We should all feel happy that this country was the founder of those schemes of mutual assistance and that they have been developed well elsewhere. The great point about this Bill, if I may say so, is that it is entirely a non-Party measure. Its provisions, which I have followed during their progress through another place, have been worked on by all Parties together, and it is one of those Bills which I think we may say (as much more frequently we can say about Bills after they leave this House) have been much improved during their passage through another place. Looking at it from another point of view, I know that a large number of the provisions of the Bill have been mutually agreed between the societies concerned and those working in the appropriate Ministry. Therefore, there is little to be said about this measure.
However, I notice that there is one point that was left open in the discussions in another place. The difficulty lay in finding words to meet a situation of this sort, to take an example. Two brothers, A and B, take out one of these insurances on the life of their father and then one of these brothers, say A, predeceases the father. The question then is whether the other brother B—and everybody is agreed that it is right that this should be allowed—can take on the policy entered into by brother A, who has died. An undertaking was given by the Government—and everybody was agreed that that would be a proper thing to do—that words should be found to meet that kind of situation. In the course of discussion on another stage of this Bill, I hope that we may hear that those words have been agreed upon and are to be put before your Lordships for insertion into the Bill.
There is only one other point on which I would like to say a few words. By the terms of this Bill, in order to be in line with their cheap money policy, the Treasury are insisting that the friendly societies and other insurance bodies concerned in this particular matter shall no longer be able to borrow at 2¾ per cent. on call, which was their old right.

§ LORD NATHAN
They will not be able to lend.

§ LORD LLEWELLIN
… to borrow from the Treasury, as I understand it—from the Debt Commissioners, if that is 734 the right phrase. Under one of the later clauses of this Bill, which the noble Lord referred to as "machinery," they an no longer able to do that. All I would point out is that this provision is rather more than machinery, because it means: hat they lend to the Government and get 2¾ per cent. for the lending. The noble Lord is quite right. It means that they will obtain a less interest. Let us realise what may be the effect of this upon a large number of people who will want to lake out this sort of insurance. In view of the large sums involved in insurance—although they are very small sums, compared with the size of the National Debt—and in consequence of this provision, the insurance bodies will probably have to charge larger premiums for the insurance that they give. So long as we all realise that the Government are bringing about that situation by their insistence on this scheme, well and good; but that may well be the result. All I am commenting upon and passing on to the noble Lord is that it seems to me to be rather euphemistic to describe this matter as merely a machinery clause.
However, we give a general welcome to this measure. So far as your Lord-ships are concerned I am sure that the Bill will meet with no opposition in its passage through this House. I look forward to seeing whether the noble Lord will be able at a later stage to put before your Lordships' House the words watch were promised in another place.

§ LORD MARLEY
My Lords, I should like to ask my noble friend one question. I understood that there was some question of annuities. I wondered whether these annuities are in line with the annuities issued by the Post Office under the Post Office Savings Scheme. I understand that there is a maximum of these annuities and that they are fixed on the average price of Consols. I am not, of course, expecting an answer to my question now; I need hardly say that. However, in the further course of the Bill, it would be interesting to know whether these annuities have been brought into line in any way and whether in the future, instead of there being a competitive basis, there will be a similar basis for subscription and for a maximum.