§ Order for Second Reading read.
§ MR. SHAW-LEFEVRE
, in moving that the Bill be now read the second time, said, that the object of it was to enable persons effecting insurances upon their lives to nominate their wives and children to receive the benefit of such insurance at their death. The nomination would have to be endorsed upon the policy of assurance, and would have all the effect of a marriage settlement, whether ante-or postnuptial. At present the execution of a deed or marriage settlement in which trustees were to be appointed was often a very troublesome and expensive process; to a large class of persons in humble circumstances it was no easy matter to find trustees who would act for them, or whom they would readily trust to receive money after their death on the chance of their paying it to the right persons. He hoped to obviate it by the very simple operation under the Bill. The company would be made the trustees for the payment of the money, and would simply be directed to pay it to the persons indicated in the nomination, and in that way the whole trouble about marriage settlement would be avoided. The proposal was not a new one, for the principle was sanctioned already by the Friendly Societies Act with regard to policies under £50. The measure had been adopted in several of our colonies—it was the law of two of the Australian colonies, of Canada, and also of New York and Massachusetts. He had been told that in Canada the immediate effect of 953 the measure was the creation of a very large class of nomination policies, and within two months after the passing of the Act, one company, of which he had information, did twice as much business as in the two previous years. If this Bill passed, he had no doubt that a great extension of insurance business would take place in this country, especially in the case of small policies. The only objection he had heard to his proposal was that it would cause a little more trouble and expense to the insurance companies. That, however, would be more than compensated by the amount of new business that would be created. The only trouble would be the identification of persons to whom the money was to be paid. But by the recent extension of equitable jurisdiction to the county courts, a great many minor difficulties which might have existed under the old law would be obviated. The Bill, he believed, would be of great benefit to persons in moderate circumstances.
§ Motion made, and Question proposed, "That the Bill be now read the second time."—(Mr. Shaw-Lefevre.)
§ MR. ALDERMAN LAWRENCE
said, they had heard of the difficulties which might arise to insurance companies if this Bill were carried, but nothing had been mentioned with regard to the difficulties which it might create as to creditors. He thought the title of the Bill ought to be, "A Bill to enable Persons to Provide for their Wives and Families at the expense of their Creditors." There was no limit to the scope of the Bill. The insurance might be for any amount, and therefore it equally applied to the upper classes and to small tradesmen, who might take the money out of their tills and pay for a life insurance, before they had provided for the satisfaction of their creditors, from whom they had obtained their stock in trade. There was no doubt a provision that if the insurer should become bankrupt or die insolvent within twelve months from the time of effecting the policy, the nomination should be void. But they all knew how easy it would be in many cases to avoid such a contingency; and if the bankruptcy or the death in insolvency should occur after that time, the creditor would have no remedy whatever, and a large sum of money might be settled upon the wives and families of persons who never had the means of effecting the insurance them- 954 selves. The operation of the Bill might also be most detrimental in regard to the insurers themselves, because it was provided in the Bill that the moment the nomination was made, no alteration could take place, find no assignment of the policy could be made, and therefore there would be no possibility on the part of the insurer of raising any money on the policy. He objected to the Bill on various grounds, and especially because it would create facilities for people to take the whole of their capital and place it out of the reach of their creditors; and they could speculate and gamble without running any risk whatever. He should not oppose the second reading of the Bill, but when it came into Committee it would require most serious consideration, as it would, in its present form, affect to a great extent the commercial honesty of the country.
§ MR. BARNETT
said, it was right the House should know that serious objections were urged against the Bill by persons deeply interested in life assurance. The petition against it which he had just had the honour to present was signed by the actuaries of nine large insurance offices, and those signatures were not merely individual signatures, but they had been made with the consent and approbation of the directors of the various companies. They were of opinion that though certain advantages might arise from nomination there were certain counterbalancing disadvantages. At present a person might assign his policy to trustees for the benefit of his family, which was often done with the larger class of policies, and he was inclined to think would still be done in preference to this principle of nomination. The great difficulty attending the proposed system of nomination would be of a legal character. The difficulty of obtaining proper discharges for policies endorsed as proposed would be very great. In the case of minors the Court of Chancery or the County Court might appoint trustees; but in the case of persons abroad becoming entitled to the amount of an insurance, it would be necessary to find out where they were, and to identify them properly when found; and there were other points which would make it very difficult for the companies to discharge the policies, and might lead to frequent litigation. The ready payment after death of the amount of a policy was one of the great inducements with persons in a certain class of life to make these provisions for their families, 955 and anything tending to impede or to delay that prompt payment would pro tanto interfere with the progress of life insurance. The extra trouble and expense and the difficulties with regard to payment must tell upon the offices. If the business of the offices were to be diminished, the profits would be diminished, and of course the assuring public would feel the loss. A certain portion of the premiums, beyond the actual measure of the risk of life, went to pay the office expenses and form a fund of profit, and if this were much reduced by increased expenditure it would cause great disappointment to insurers. He did not object to the second reading of the Bill, but when it came to be discussed in Committee he should feel it his duty to propose several alterations. The question would arise, whether some copy of the nomination should not be given to the offices, and he believed in the Bill of last year it was provided that some fee should be given to the offices for the registration of the nomination, and in some measure as a compensation for the additional trouble which would be created. The offices had a great objection to the responsibility of being made trustees for the insurances, and there might be some means of obviating that by nominating some one or two persons besides those who were to have the money, and they could give a valid discharge to the office upon the immediate payment of the money, undertaking themselves to find out and settle with the nominees who were to receive the money. One of the proposals contained in the Bill was that all bonuses should be added to the amount assured for the benefit of the nominees. But there were three large insurance companies whose constitution only entitled them to give a bonus by the reduction of the premium—a mode of operation which was very popular. Those were points, however, which would have to be settled in Committee, where the Bill would have to be carefully watched.
§ MR. NEATE
said, that the object of the Bill was simply to obviate the expensive and cumbrous process of a deed of assignment by placing the nominees in the same position as they would occupy under such a deed. It was true, as the hon. Member for the City of London had pointed out, that the insurer, in nominating his wife and children to receive the amount of his insurance, precluded himself from being able to raise any money upon his policy. But that was a point for the insurer himself to 956 consider, and was no objection to the Bill. In the absence of any legal objection to the Bill from any legal authority, he did not think they could do otherwise than agree to the second reading.
§ MR. DENMAN
thought that his hon. Friend who had just spoken had not done full justice to the objection of the hon. Member for the City of London. That objection was that the Bill would facilitate operations unfavourable to creditors, and that it was not desirable to do anything of that kind. It was notorious that rich contractors, carrying on dangerously speculative business were in the habit of placing money out of the reach of their creditors for the benefit of their wives and families. Now this Bill would facilitate operations of that kind, which would be very undesirable. The Bill was not confined to small operations, nor to annual or periodical payments. A great contractor, carrying on works which might make him worth almost a million or leave him in debt to that amount, and who could put off insolvency for a year or two, would be enabled by this Bill, with no expense or trouble, to pay down £100,000 at once to insure his life on a policy which at his death would bring in £200,000, and thus to withdraw from risk a large part of the fund which ought to be available to his creditors. He did not consider such operations legitimate. If the Bill were limited to policies of a certain amount on which the premiums were paid from year to year, and were not permitted to extend to cases where enormous sums might be sunk in a policy, and so withdrawn from the reach of creditors, it might be a useful measure, and he begged to commend the points he had suggested to his hon. Friend the Member for Reading.
THE ATTORNEY GENERAL
said, he was ready to agree to the second reading of the Bill but many of its details would require considerable alteration, and more especially those which affected the interests of creditors. The 4th clause would enact that in the event of a nomination having taken place the money secured was to be absolutely free from payment to the creditors, provided the nominator had not been a bankrupt within a year of the nomination. Now it would be necessary to consider how far that provision was consistent with the existing Bankruptcy law. That, however, was a point which, with other details in the measure, would have to be carefully considered when it went into Committee.
§ MR. SHAW-LEFEVRE
explained that the Bill was intended to meet the cases of persons of small means, and not the cases of large policies, which were now dealt with by deeds of assignment.
§ Motion agreed to.
§ Bill read a second time, and committed for To-morrow.