INDUSTRIAL INSURANCE. (Hansard, 29 March 1934)

§ Sir BASIL PETO
I desire to call the attention of the House before it adjourns to another matter which I regard as of great gravity to the great mass of industrial workers in this country. I refer to the question of industrial insurance on which we have had a report from the committee set up on 2nd April, 1931, by Viscount Snowden—he was then Mr. Snowden, the Chancellor of the Exchequer—which was presided over by Sir Benjamin Cohen, K.C. That Committee on Industrial Insurance reported in July of last year, and the report as a whole is one of striking condemnation of the present system as it is worked by the great companies and societies as far as the interests of the working-classes are concerned. I have asked questions from time to time on this subject. I asked one on 15th November last year in which I set out the outline of the principal findings of the committee and asked what the Government were going to do about this report. I asked another question on the 7th of this month. On both occasions I was informed that the report was under examination, but that no action had yet been decided upon. I understand from the Financial Secretary, who I have no doubt will be here in a few moments, that he is not yet in a position to give me any very definite statement with regard to the Government's intentions. Be that as it may, and however long it may take the Government to decide upon their course of action, I have thought it my duty, Mr. Speaker, to bring this matter to the attention of the House.
This report commences with a very admirable statement of the size and growth of the business of industrial insurance since 1920 during the years of prolonged industrial depression. Premium income has increased from £36,000,000 per annum to £54,000,000 per annum. It now exceeds the whole of the contributions of employers and workers to national health insurance and State pensions combined. That statement alone will show the magnitude of this business of industrial insurance. The business, the report tells us, is conducted by 16 companies and 153 collecting societies, employing 52,000 whole-time collectors, 16,000 spare time agents, and 2,650 canvassers. At the end of 1930—the last year for which the committee had accounts and statements before 2172 them—there were 80,000,000 policies in force in Great Britain and Ireland, that is nearly two policies per head of the whole population, man, woman and child. That is an extraordinary statement, and it shows the enormous pressure exercised on the working-classes to take out more and more of these policies.
I turn to the question of how this £54,000,000 of annual premium income, extracted in most cases from the wives of working men, on policies for burial benefits and such matters as that, is spent. £18,400,000, or 34 per cent. of it, goes in commissions and expenses of management. That is stated in paragraph 28 of the Report. The amount paid in claims absorbed only £22,400,000 out of the £54,000,000. It does not look as if the working-classes as a whole have got a very good proposition when they pay £54,000,000 in premiums and only get £22,400,000 back in claims paid. It is the nature of the business that it consists of an enormous number of petty transactions. The average amount assured under whole life policies which number 67,000,000 out of 80,000,000 is only £14 8s. and the average premium payment per week is 2¾d. It must be a small business in individual cases—although enormous in the aggregate—because there is a statutory maximum for insurances taken out by parents and others in the ease of children. It is £6 at death under the age of three years, £10 at death between the ages of three years and six years, and £15 at death between the ages of six years and 10 years. Turning to the latest figures which the Committee had before them on the question of lapses, I find that the new policies taken out in 1929 numbered 10,000,000. Of that number, 6,000,000 were discontinued, 4,750,000 of those policies lapsed altogether, and 1,250,000 had surrender values or free paid-up policies granted. That was in 1929, a year of comparative prosperity. What must it have been in 1931? One can only come to the conclusion that the worse the position of the industrial population the greater is the amount of profit annually derived from this business. That is a state of affairs that, using a classic phrase, "brooks no delay" on the part of the Government in dealing with it. As to the value of these free paid-up policies, in paragraph 56 of the Report the Committee say: 2173 An estimate which has been prepared for us leads us to the conclusion that the owners of the policies lapsing in each year pay in the aggregate not less than £1,000,000 in premiums in excess of the cost of the insurance 'cover' which they received. And they go on to say: What is certain is that those who have taken policies which have lapsed within a short time, and the vast majority of whom have entered into the contract under the pressure of the agent or other canvasser, have had in assurance cover the value of not more than one-fifth of the premiums they have paid. I apologise to the House for stressing this point, but we have passed a good deal of legislation in order to get these free-paid-up policies for the industrial insured, and we thought we had done something of value to them. The report of the committee says that we have not. In paragraph 57 they say: After paying say 2d. a week for two years on a whole life policy effected on a life aged 40 the owner on discontinuing his payment will receive a free policy of 6s. or 7s. payable on the death of the life assured. Even if we disregard the probability of the loss or destruction of this 'policy' during the many years which, on average, must elapse before it can be encashed, it is clear that an assurance of such an amount is of no real service to its owner…. The free policy granted in compensation for premiums paid in the past on a discontinued policy can only be regarded as having a real value if its amount is fairly substantial. In the great number of cases in which a free policy is issued on the discontinuance of premiums within a few years after the original policy is effected, its amount is necessarily trifling and the payer of the premium is, for all practical purposes, no better off than if his policy had lapsed without consideration. From the point of the public, therefore, such policies must be grouped with those which of actual lapse as representing a direct waste of economic effort. The House, therefore, cannot take a complacent view, because this report says that this free policy is of no value to the vast majority of people to whom it is given. The principal recommendations in the report are that policy owners should be allotted the sum of not less than two-thirds of the profits. That is in paragraph 138, and in paragraph 137 they say that the expenses of management should be limited to 30 per cent. of the premium income. How high is the percentage of these expenses of management is indicated in paragraphs 33 and 34. Apart from the Prudential and the Pearl the average is now 39 per cent. Before 1920 2174 it was 43 per cent. of the whole premium income. The Royal London Mutual Assurance Society still pays its collectors 25s. of the weekly premiums and substantial fees for new business. In 1930 the commissions to agents and the salaries of superintendents absorbed 31 per cent. of the premiums; new business charges 5½ per cent., and head office charges 6½ per cent., making 43 per cent. of the premiums going in expenses.
That was as recently as 1930. The expense ratio of the five large collecting societies is over 41 per cent. and their agents receive on new business the whole of the premiums which are paid during the first 13 to 16 weeks, and in some cases a bonus on increased premiums is also collected.
In these societies, and also in the Royal London and Co-operative Insurance Society, agents obtain a vested interest in the business. That is a very important fact. They have a right in the event of death to nominate their successor, which means that they can sell their position as an agent or collector, and normally a sum equivalent to 30 times the amount of the weekly premiums collected is paid. For example, if an agent has £15 of premiums to collect on his book every week he can sell his book on the appointment of his successor for £450. That is brought out in paragraph 37. The Committee, however, were not satisfied with these major recommendations. They make a very significant statement in paragraph 5 to which I want to refer. They say: Arising out of the evidence, we have in Part II of this Report made certain recommendations for the amendment of the law, but as the inquiry has proceeded we have been gradually led to the conclusion that while improvements of varying degree may be expected from the adoption of these proposals, the defects of the business, and their consequences to the assuring public, call for remedial measures of a much more substantial character than can be secured by the changes in the statutory provisions which have been submitted to us. In the light of that statement I have considered what might be the more drastic remedial measures which the committee had in mind. I recall the time when National Health Insurance was first before this House in 1911, and I have been wondering why this business of industrial insurance by workers for these trivial sums for burial was not included in the National Health scheme. My 2175 recollection is that it was originally included in the Bill presented to the House, but as it was necessary to get insurance companies and societies favourable to the scheme of National Health Insurance as a whole, and to get their co-operation in working it, they were left with a free run to continue their lucrative business of insuring industrial workers in order to secure a decent burial—

§ Mr. SPEAKER
Do I understand that the hon. Member is asking the Government to legislate on the report of the committee?

§ Sir B. PETO
I am asking the Government what they are going to do about it.

§ Mr. SPEAKER
Is it not the case that the Government cannot do anything without legislation?

§ Sir B. PETO
I hope we shall hear from the Financial Secretary that they are going to investigate the matter.

§ Mr. SPEAKER
Before the Debate proceeds further, I think we had better find out at once whether it will require legislation; otherwise, the Debate is quite out of order.

§ The FINANCIAL SECRETARY to the TREASURY (Mr. Hore-Belisha)
I do not object at all to the pressure being put upon us to legislate, but it is the fact that absolutely nothing can be done by the Government except by the presentation of a Bill.

§ Mr. HARCOURT JOHNSTONE
With great deference to the Financial Secretary, I do not think that is so. I agree that many of the points raised by the hon. Member for Barnstaple (Sir B. Peto) cannot be dealt with except by legislation, but there are other matters which could be dealt with by administrative changes without the introduction of legislation.

§ Mr. HORE-BELISHA
I do not in the least resist the pressure that is being put upon us. It is a fact, however, that none of these recommendations could be put into force without legislation.

§ Mr. JOHNSTONE
I agree that that is probably so on the report of the committee, but that does not bar us from recommending changes of an administra- 2176 tive character on which the Debate could proceed.

§ Mr. SPEAKER
The hon. Member for Barnstaple (Sir B. Peto) raised a question which appeared to me to involve legislation. If hon. Members are asking the Government to do something that could be done without legislation, that would be in order.

§ Mr. JANNER
Many of the points that have been raised by the hon. Member for Barnstaple (Sir B. Peto) might be dealt with if, without further legislation, pressure were brought to bear upon those who are in control, so that the law as it stands at present is properly administered and so that action is taken against those who infringe the law.

§ Sir B. PETO
The two principal recommendations to which I have referred clearly only involve the necessity of other companies working up their practice to the level now attained by the Prudential Company, and no legislation whatever will be needed. If the Government would bring pressure to bear on the other companies so as to make their practice as satisfactory as that of the Prudential Company there would be no need for legislation at all.

§ Mr. SPEAKER
I cannot possibly be a judge as to what the Government can or cannot do, but if the representative of the Government tells me that they can do nothing without legislation I am bound to believe him.

§ Sir B. PETO
The Government are actually in negotiation with the companies now.

§ Mr. HORE-BELISHA
I do not know whether it would be of any assistance, but I can say that if the purpose of the hon. Member's remarks is to urge all the other companies to work up to the high standard of the Prudential, of course that is not a matter which concerns me at all. I can only hope that the other companies will take notice of what my hon. Friend has said. As far as the Government are concerned, we have no power under the law to compel the other companies.

§ Mr. SPEAKER
I do not think any useful purpose would be served by proceeding with the discussion on the point of Order. It is quite clear that the 2177 Government can do nothing without legislation, and therefore to continue the Debate would be out of order.

§ Miss RATHBONE
Would not the hon. Member for Barnstaple (Sir B. Peto) bring his remarks within the Rules of Order if he addressed them to the point of asking for further inquiry into the matter?

§ Mr. SPEAKER
That would be a very roundabout way of doing something that is out of order.

Mr. BEVAN
I rise to draw the attention of the House to an entirely different matter.

§ Mr. JOHNSTONE
On a point of Order. I am sorry to interrupt, but I did not understand from what you said, Mr. Speaker, that the whole discussion on the question raised by the hon. Member for Barnstaple (Sir B. Peto) would automatically close. There are innumerable things not contained in the Committee's Report which can be raised on this question. All that the Financial Secretary to the Treasury has said is that the recommendations of the report cannot be carried out without legislation. It is not denied that there are administrative actions which can be taken to improve the practice and the administration of industrial assurance. For example, there is the point, already raised, that the actual administration of the law can be tightened up. I am sure the Financial Secretary would not maintain for a moment that administratively the functions of the Commissioner could not be extended without any legislation whatever.

§ Mr. SPEAKER
I was relying on the speech that was made by the hon. Member who introduced this subject. I did not know there were other points to be raised. We must leave them till later.