INDUSTRIAL ASSURANCE AND FRIENDLY SOCIETIES (EMERGENCY PROTECTION FROM FORFEITURE) BILL. (Hansard, 31 January 1940)

§ The Attorney-General
I was saying that I hoped that hon. Members who had interested themselves particularly in this matter would realise that the Government have not been idle, but have endeavoured by discussions with the very large number of companies and societies and so on involved to provide a workable scheme which would give adequate and reasonable protection as far as financial considerations allow. Although so far as ordinary insurance business is concerned that is being dealt with by a voluntary arrangement, in the case of industrial insurance as the House knows that is subject to statutory control under the Act of 1923, and legislation of some kind would have been necessary in order to give the necessary powers to the companies and friendly societies. There being already this statutory code applying to companies, it is more satisfactory to set out the whole scheme in a Bill, although possibly some of the particular provisions of the Bill might be acted 1175 upon by agreement without the statute. With those few words of preamble the best thing I can do is to expound the Bill quite shortly going through it Clause by Clause.
Clause I sets out the classes of policy to which the Act applies. It applies, first of all, to policies of industrial insurance. Those are policies where the premiums are collected from house to house at certain intervals of time. That can be carried on by companies or registered friendly societies which are registered as collecting societies. There may also be cases of policies to which it is desirable to give protection, policies which are effected with collecting societies although they do not in those cases actually collect the premium. Those are covered by paragraph (b). Then there may be policies effected with friendly societies which are not registered as collecting societies—where, ex hypothesi, the premiums are not collected. There may be some such policy—a premium or when there is a separate life, a separate life policy—where protection is desired. That is not industrial insurance business and does not come under the Act of 1923; therefore, it is desirable to bring this in, and that is a slightly different matter. The chief difference arises because, with regard to (a) and (b), under the existing law, if the society or company intends to forfeit, under the Statute it has to serve a notice, and we use that statutory provision for the purpose of this Bill, as will be seen in a moment. The policies which are brought in under (c) are not at present subject to any provision of the statutory notice, and therefore there has to be a special provision for notice.

§ Mr. Glenvil Hall
Notice of arrears.

§ The Attorney-General
Yes. With regard to (a) and (b), if a company desires to forfeit, it has already to serve a notice of forfeiture, and the scheme in the Bill is to add to that notice a notice of rights under the Bill. In (c) no statutory notice has to be served in respect of policies, and therefore we must have a special provision in regard to that. I know this is a little technical, and I thought that if I gave that exposition, it would enable the House to follow the remaining parts of the Bill. The Bill protects policies for an amount not exceeding £exclusive of any bonus, which were effected at least 1176 two years before 1st September, 1939. There was a similar but more limited provision in the last war. Until a policy has been going for two years it really has no surrender value.
Under Clause 2 we have the provision under which the policy holder is given notice of his rights under this Bill. Subsection (1) in Clause 2 provides that if and when notice of forfeiture under the old Act is served, that notice is to contain a statement telling the policy owner of his rights under this Act. His rights are that if he is unable to pay the premiums on which the notice of forfeiture is based owing to war circumstances, then he can apply for protection under the Act. Sub-section (2) is put in merely to meet cases which arise from time to time where premiums are being paid, not by the policy owner himself, but by someone on his behalf. Sub-section (3) provides that if the company or collecting society refuse the application, that is to say, if they say they are not satisfied that a policy holder's circumstances are such as to entitle him to the protection of the Bill, then the applicant has the right of appeal to the Industrial Assurance Commissioner. The machinery for those appeals is dealt with in Clause 6, and I will say a word or two about the procedure when I come to that Clause. Subsection (4) deals with the period pending a possible appeal, and Sub-section (5) says what the protection is. This is an important part of the Bill. It states: Where an application under this Section is granted, whether by the company or society or the Commissioner, then, subject to the provisions of this Act relating to the determination of protection, the policy shall not be forfeited for the default to which the application related or any subsequent default in the payment of premiums and no further notice shall be served under Section twenty-three of the Industrial Assurance Act, 1923. The question of the determination of protection comes under Clause 4, and I will deal with it when I come to that Clause.

§ Mr. Garro Jones
Would the right hon. and learned Gentleman say why the Industrial Assurance Commissioner is the official chosen to adjudicate on whether or not a policy holder is financially affected by the war? In no other case has the decision on that been given to any other official than a judicial officer subject to an appeal to a higher court. How is the Commissioner to obtain the facts? I am all the more concerned upon 1177 this point because the Industrial Assurance Commissioner is an individual, as we have shown, who, if he behaves himself with reference to insurance companies for the whole of his term of office, may obtain on retirement a directorship with the Prudential or some other insurance company.

§ The Attorney-General
This matter and the question of the best machinery for working it have been the subject of fairly prolonged discussions, not only with the companies, but with the friendly societies and others concerned. It was thought that the Industrial Assurance Commissioner, who, as the hon. Gentleman knows, has a very wide knowledge of all aspects of this question, would be the appropriate officer. If the hon. Gentleman takes the opposite view, he will have opportunities of debating it. I should have thought it was really quite wrong to suggest that an official who had a duty of this kind placed upon him by Parliament would be influenced in making his decisions by the prospect of whether or not he will ultimately, when he retires, get an offer of this or that post, and whether he might or might not he allowed to take it. The hon. Gentleman obviously is raising a point of principle, and we cannot discuss it by question and answer in the course of my speech. I have noted his point, and I have told him that as a result of discussions it was felt that the holder of this office was a suitable and proper tribunal.

§ Mr. Garro Jones
Would the right hon. and learned Gentleman stand at that Box and say that he would be content to allow any other judicial functionary in our legal system to be laid open to the temptation during his period of service so to adjudicate on points of law that he would be more likely on retirement to be open to appointment to commercial directorships?

§ The Financial Secretary to the Treasury (Captain Crookshank)
I do not think questions of that sort ought to be raised by the hon. Gentleman, making imputations in this House on an official appointed to such a post. If the hon. Gentleman has imputations of that sort to make, let him make them at the proper time. I am responsible to this 1178 House for the Industrial Assurance Commissioner, and I resent this sort of suggestion being made.

§ Mr. Garro Jones
If the right hon. and gallant Gentleman is responsible for the Industrial Assurance Commissioner, is he also responsible for withholding permission for him, when he has finished his career, to accept directorships?

§ The Attorney-General
There must be many cases in which people in the service of the Crown have, in the course of their careers, to decide questions against one side or another, and there is always the possibility that when they conclude their service to the Crown and retire, they may be able to take other work. There must be countless occasions on which people are having to take decisions which may adversely affect, let us say, organised labour or insurance companies. It is possible, if one is looking for improper motives, to suggest that if those people look far enough ahead, to the time when they will retire, they will say, "I will not do my duty, because if I give an improper decision, I might be provided for later as a result." I resent that suggestion. After discussions with the insurance societies and trade unions, it has been felt that this gentleman was to be trusted, and is an acceptable and proper person to deal with appeals.

§ Mr. Buchanan
Are the trade unions involved?

§ The Attorney-General
I am told that, as very often happens, informal discussions took place before this scheme was decided upon, and I understand—no doubt I shall be corrected if I am wrong—that all those with whom discussions took place agreed that this gentleman was a proper person for the post.

§ Mr. Buchanan
Where did the trade unions come in in the discussions which took place?

§ The Attorney-General
I cannot tell the hon. Gentleman that, but I understand that discussions took place with the Trades Union Congress, or, at least, with trade union representatives.

§ Mr. Buchanan
Yes; but the trade unions are not affected under this Bill because they pay benefits. They are not affected like friendly societies.

§ The Attorney-General
No; but it is not unusual that any matter which affects organised labour should be discussed with representatives of organised labour, to get their opinions.

§ Mr. John Wilmot
Were the discussions with the trade unions conducted with them in their capacity, as it were, as representatives of policy holders?

§ The Attorney-General
They were consulted as persons interested through their members in the general questions dealt with by the Bill.

§ Mr. Shinwell
This is becoming rather a strange Debate, but as everybody is chipping in, perhaps I might have a chip myself. The fact is that there is a very large body of industrial insurance agents—about 25,000 of them—organised in a trade union, and they have consulted the Trades Union Congress in connection with this Bill. That body has endorsed the view that it expressed, that this Bill was quite satisfactory. As the insurance agents are concerned not only with their own pecuniary interests but also with maintaining as large a body of policy holders as possible, they believe this to be satisfactory.

§ Mr. Speaker
I must ask hon. Members to conduct the Debate in a proper way.

§ The Attorney-General
Clause 3 of the Bill—

§ Mr. Bevan
Perhaps hon. Members might be consulted, now that all the other people have been consulted.

§ The Attorney-General
That is what I am doing now. It is not a bad thing, I suggest, to take such steps as one can to inform oneself about such subjects as this before coming to the House with a Bill. Clause 3 deals with what happens when there is a default in the payment of any premiums and protection is granted in respect of the default. Paragraph (a) deals with the position when before the expiration of the period of grace a claim arises. The claim is paid, less any premiums which are in arrear and have not been tendered before the claim arises, with interest. Paragraph (b) deals with what happens when the policy is for the whole term of life, maturing on death, and is in force 'at the expiration of the 1180 period of grace. If during the year premiums have not been paid when the war or the period of emergency, comes to an end, what happens is that the policy holder, if he is able to do so, can pay up the arrears. If he pays up all the arrears, it is as if he had never been in arrears at all. But if he does not pay up all the arrears, or any of them, there is a deduction naturally from the original value of the policy. That is arrived at, according to the age group, by multiplying the unpaid premiums by a multiplier which occurs in the Schedule. That has been calculated by actuaries, as the actuarial equivalent of the unpaid premium. In the case of an endowment policy, the procedure is somewhat different. Take a policy maturing at 60. If the war has been going on two years or longer, without premiums being paid, you add that period on to the original age at which the policy should mature. That seems a satisfactory and sensible arrangement. If he is able to pay all the arrears interest will not be charged.

§ Mr. Wilmot
He resumes his status?

§ The Attorney-General
He resumes as if he had never defaulted or been in arrears. Sub-section (3) of Clause 3 is an enabling provision, in case difficulties arise in applying the statutory rules. We cannot foresee exactly what will happen, but undoubtedly rather difficult questions might arise in the application of those rules. If a policy has been protected and the period of protection comes to an end the man pays no more than he has forfeited under the ordinary law but this has been put in perhaps ex abundanli cautela so that if there are unfairnesses in applying the original rules they may he adjusted.

§ Mr. Glenvil Hall
Is the right hon. and learned Gentleman going to reply to the Debate? If not, the only way for us to bring up points is by interjecting as we go along. On this matter I think there are several points with which the right hon. and learned Gentleman might be asked to deal.

§ The Attorney-General
I think I had better leave it that either my hon. and learned Friend or I will reply. If a number of points are likely to be raised, of course, there will be a reply. Anyhow, I can reply as shortly as the points 1181 raised permit, and perhaps it will be simpler if I now go on with my disquisition.

§ Mr. Bevan
Will the Attorney-General speak in English and not in Latin, so that we can understand him?

§ The Attorney-General
Oh, yes; I will translate "out of excessive caution." Clause 4 deals with the determination of protection and gives the insurance company or friendly society the right, if it comes to their knowledge that circumstances have changed and premiums can be paid without hardship, to refer the matter to the Commissioner, and, if he is satisfied, then the period comes to an end. Clause 5 is the retrospective Clause which makes this Bill retrospective to the beginning of the war. It provides, if a notice of forfeiture has been served and is in course of operation at the passing of the Act, for the cancellation of such notice as if it had never been served. If, since 3rd September, a notice has been served, the period has elapsed, the premium is unpaid and the policy is forfeited, a man can apply within three months to have the policy reinstated if he desires and he proves his hardship. That really is a statement of the substance of Clause 5.
Clause 6 deals with the hearing of appeals. The Commissioner will have the power that he has under Section 68 of the Friendly Societies Act, 1896, to take evidence on oath and to require the attendance of witnesses, and the appeal will be dealt with by him, as disputes, referred to him under that Section, are dealt with under the present law. Clause 7 is a Clause which is necessary to deal with the class of policies which fall under Clause 1 (c). As I explained to the House, the statutory distinction between thee policies and the others is that, under these policies there does not, under the present law, have to be a statutory notice if the friendly society desire forfeiture. We have had to make special provision for notice, and no doubt there never would be a forfeiture without a notice, so that it is not imposing any new hardship upon them, that, when they serve the non-statutory notice, which they would serve according to ordinary custom, they will, under the Bill have to add to it notice of the rights under this Bill. Clauses 8, 9, 10 and 11 are formal. Clause 12 provides that the Act shall be 1182 read with the other Industrial Assurance Acts, which will incorporate the provisions that make it an offence if those concerned do not comply with the provisions of the Act. I am conscious that this is rather a technical and complicated subject, but I trust that I have explained the broad lines of this proposal which, I understand, is welcomed in most quarters, and I hope that the House will give the Bill a Second Reading.

§ Mr. Bevan
May I put one point to the Attorney-General? On a Bill of this kind, which is very complicated and affects so many people, those of us in the House of Commons who have not had the benefit of legal training ought to have had the benefit of a memorandum attached to the Bill. There is no White Paper in the Vote Office and there is no memorandum attached to the Bill, and will the learned Attorney-General bear that fact in mind in future?

§ The Attorney-General
Yes, Sir.

§ Mr. Rhys Davies
I feel very nervous somehow in rising to speak to-day. There is quite an array of lawyers opposite, and I am surrounded, too, with very eminent members of the legal profession on my own side; and, belonging to a very humble race, I am therefore more nervous than usual. I am speaking, of course, on behalf of the Opposition who have considered this Measure. We regard it as a useful and a necessary Bill, although we are not quite satisfied with every detail of the Measure. We are anxious that the national emergency should not destroy the financial basis of any of our institutions, and to that end we shall not oppose this Bill.
The Government, insurance companies, collecting societies and the trade unions covering insurance agents all welcome this Measure. There is only one class of person affected that has not been and could not be consulted and that is the policy-holder. It is the duty of Parliament therefore to see that while we could not consult the millions of policyholders we should try to safeguard their interests, and the Opposition feel disposed to put two or three criticisms of this Measure on their behalf. If a Bill of this kind were presented to Parliament in normal times we would have raised some very fundamental issues about the 1183 business of industrial insurance as a whole; we would have had something to say on the recommendations of the Cohen Committee of 1934 and some criticisms on the whole financial arrangements of this colossal business of industrial insurance in this country. We would also have had something to say about the appointment of some gentlemen upon the directorate of some of these companies but all that must wait until some other occasion. If this were the occasion, we would have liked to have said something about the ownership and control of these vast institutions dealing with insurance, but that of course does not belong to the Bill.
There is one fundamental weakness in this Bill. I see the Financial Secretary to the Treasury present and it is to him that I direct this suggestion. This Bill will safeguard the policy-holder from forfeiture because he cannot afford to pay his premiums. I suppose that the largest number of policy-holders affected will be men in the fighting forces. It seems to me to be a very strange anomaly that men who are fighting the battles of this country are receiving allowances which are so infinitesimal that they cannot afford to pay 3d., 4d. or 6d. a week to keep their insurance premiums alive. The position is, that in any benefit accruing under this Bill to that kind of policyholder the financial liability is inevitably thrown upon other policy-holders. All we are doing therefore is to compel the vast majority of policy-holders to support the other smaller number of policy-holders who are suffering hardships owing to the war. It is the poor assisting the poor, as is too often the case.
I now turn to the details of the Bill. The right hon. and learned Gentleman, although a very clever lawyer, did not refer to the differences between the provisions of this Measure and those which safeguarded industrial assurance policies during the last war. One of the provisions of the 1914 Act was that the maximum value of the policy was £25; on this occasion it is to be £50, and that is all to the good. But why is there any figure put in at all? Then, in the 1914 Act, although £25 was the maximum, insurance policies covering all sums were immune from forfeiture. How comes it that that difference is made against the policy holder under this Bill? I know 1184 that the insurance companies will say, "You must not make it too easy for the policy holder; we found out during the last war that people who could afford to pay premiums did not do so and thereby took undue advantage of the insurance companies under the 1914 Act." I agree that there is a very strong point to be made on that score. Nevertheless, I have yet to learn that any insurance company or collecting society suffered financial difficulties by the wider arrangement made during the war of 1914–18. I ask the right hon. and learned Gentleman therefore whether it is not possible to eliminate the £50 altogether. The sums insured are not very large anyway; most of them are from £20 to £100 maybe. The right hon. and learned Gentleman will know that before any benefit is paid on a policy the insurance company takes care to deduct all arrears of premiums due from the death benefits, plus 3 per cent. compound interest on those arrears. We do not see why, therefore, there should be any amount stipulated at all. All industrial assurance policies should be covered on the principle that the companies are safeguarded by deducting arrears due before they pay any benefit.
I now come to the second important point, of the procedure to be adopted under the Bill. The insurance company will send a notice to the policy holder and within 28 days the policy holder in turn will appeal to the insurance company stating that he is suffering hardship. I do not want to be critical of insurance companies at all in saying that their decisions may not be fair. I am assured that the insurance agent will, in the very nature of his work assist the policy holder in making the appeal to the insurance company. So far so good. But see what happens next. Supposing an insurance company says to a policy holder "You have not made out your case?" Hon. Gentlemen know as well as I do that there are millions of people in this country who have not the remotest idea of how to frame an appeal to any Government Department. The insurance agent will hardly assist in that case. I ask the right hon. and learned Gentleman how is the average person, the wife of a man serving in the Forces, ordinary people up and down the country in small towns and villages and little urban districts, to make an appeal to the Industrial Insurance Commissioner in London? It would be a 1185 most difficult task as far as they are concerned. I guarantee in advance that most of the appeals on that score will be dropped, merely because the position will be an obviously difficult one. A point has been raised as to whether the insurance commissioner is the right person to decide an appeal of that kind. I think I accurately state the views of the Committee of our party which discussed this Bill and decided upon our policy when I say this much. To commence with there is a nasty feeling abroad about a previous insurance commissioner being appointed a director of the Prudential Insurance Company within three months of his retiring on a pension from the service of the Government. That has left a nasty taste in the insurance world; there is no doubt about that. I am not so sure myself, however, that to hand these cases to the courts and the legal profession is any better than leaving the insurance commissioner to decide the issue.

§ Mr. Buchanan
As I understand it, if this gentleman is not going on circuit it will be nearly impossible to appeal. If you made it a local appeal it would mean that a Glasgow person who appealed would appeal to the Sheriff Court and get a hearing on the spot. I should be glad if the Attorney-General can tell me how tins gentleman can hear all these cases throughout the country?

§ Mr. Rhys Davies
That is a point which the right hon. and learned Gentleman will probably take into account; but what I want to say is this: if all the National Health Insurance societies and their members became the subject of legal controversy in the courts I am sure a large sum of money would be wasted. There is a lot of money wasted on the law on workmen's compensation, but I am not going to argue about that at this stage. My personal view is, however, that if these appeals fell into the hands of the legal profession and the courts I am not so sure that the decision would be any more favourable to the policy-holder than the one to be given by the Industrial Insurance rice Commissioner. I should be glad, however, if the right hon. and learned Gentleman, or his deputy, can tell us if these cases will be heard locally; there is a strong case to be made out on that score.
Now let me come to the next point. We are not at all satisfied with the two 1186 years' provision. There are approximately 10,000,000 policies effected annually in this country; and during the first 12 months about 4,500,000 lapse. I think it is true to say that industrial assurance finance is very largely based on lapsed policies. The appeal I am making to the right hon. and learned Gentleman is this. If we cannot get the two years' provision wiped out altogether will he not consider whether all policies that were effected one year before the outbreak of war shall be included in this Bill? I will tell him why. When a person has been paying premiums for two, three, four or five years he is more likely to continue paying the longer he persists. Take the case of a man who in June last year took out a policy for 6d. a week. War was declared in September and he was called up. In such a case he is much more likely to allow his policy to lapse than if he had taken it out two or three years before the war started. The longer he pays his premiums the greater his reluctance to allow the policy to lapse. Consequently, it is much more agreeable to the insurance companies that the period shall be two years rather than one, or less. I have not very much more to say except to add that we are not quite certain, either, about this 28 days' notice. Notice has to be sent to the last known address. I live in Lancashire and know that people have been evacuated to St. Anne's, Cleveleys, Blackpool and other places; and I can conceive of a case failing to make good by the mere technicality of the notice not reaching a person in time. I wonder whether the Government will consider an extension of the 28 days period.
We are not going to oppose this Bill because, as I said, we think it is a necessary Measure. Insurance agents, in particular, want it because they would like to keep all their policies alive during the period of the emergency. This Bill will, naturally, have a very wide application. It will cover not only men in the fighting Forces but professional men who are out of jobs—architects, surveyors, mechanical engineers, little business folks, and the like, who have never earned a penny piece since the war broke out. In fact, some of these people are in a worse predicament than if they had been one of the ordinary insured unemployed. To sum up, these are the points we are a 1187 little critical about. Two years is too long; there ought to be a shorter period in order to cover a very much larger number of policies. The £50 maximum should be deleted; there should be no figure at all, especially in view of the fact that the insurance companies deduct all arrears of premiums from any benefit paid. The companies are safeguarded further; arrears have to be paid if and when the man returns to work.
I do not think I have exaggerated the position, and I trust the right hon. and learned Gentleman will take note of the few criticisms we have made and that we shall fashion this Bill in such a way that the companies, collecting societies, and even insurance agents, will not suffer. We want, above all things, to see that the policy holders get a fair deal, and to that extent we shall support the Measure.

§ Mr. Glenvil Hall
I realise that this is an agreed Measure and that such changes as we may seek to effect can be brought forward when we reach the Committee stage. But I would like to reinforce what the hon. Gentleman on the Front Opposition Bench said when he indicated that we on this side of the House think the limit of £50 somewhat low. We see no reason why it should not be doubled, because, although it is possibly true that the Bill deals in the main with friendly societies and industrial insurance, where the average value of the policy is not more than £16, £17, or £20, there are obviously occasions when people who have policies might not come within the scope of this, although justice demands that they should. I want, in the few observations I propose to make, to ask one or two questions to which I shall be pleased to have an answer. The learned Attorney-General did mention when he came to Clause 2, Sub-section (3) that the Commissioner shall, if he is satisfied that the application ought to have been granted, make an order requiring the company or society to endorse the policy to the effect that it is a policy protected under this Act. Those words, it seems to me, put into the hands of the Commissioner the right to say, after the company has either rejected or acceded to the claim against forfeiture, that this does come within the terms of being due to war service or comes outside them. You are putting into his 1188 hands a tremendous power which usually resides only in the courts, and it is another instance of legislation by reference and the putting into the hands of civil servants powers which should properly reside in this House or, through this House, with the law courts. The same point, in a different way, arises in Clause 3, Subsection (3), of the Bill. I would like to ask why it is that these considerable powers are left in the hands of the Commissioner? Would it not be proper to put at the end of the Bill a Schedule similar to the one now there in order that it should not be left to him to decide? A table of factors should be set forth to which he must go when he is coming to a decision as to what is the value of the policy in question. I think it is unfair that both in this Sub-section and that referred to by the hon. Member for North Aberdeen (Mr. Garro Jones), such power should be left in the hands of a single individual, and I would ask the right hon. and learned Gentleman to reassure us on that point.

§ Sir Richard Acland
There is one point I would like to raise on this Bill. It seems quite impossible for any private Member to solve the question by looking at the Bill, but is it expected that insurance companies will actually lose any money over its operation?

§ Mr. Bevan
No.

§ Sir R. Acland
One could see certain circumstances in which insurance companies would lose money on a particular policy and others in which they would gain money, such as postponing the date of maturity. The premiums previously paid for two, three, or four years would earn interest all the time before they were called upon to pay benefit. But I understand there is no doubt that on balance insurance companies do not stand to lose a penny piece out of the operation of this Bill. That being so, I am surprised and disappointed at the attitude taken up by the Front Opposition Bench on this Bill, because it seems to me one more small example of how not to run the war. The war is being run on the basis that no private interest must, under any circumstances, lose any money. I do not think you can do it that way. I should have thought that a time of war was a golden opportunity for putting through certain 1189 reforms and taking over the whole of industrial insurance, cutting out wasteful competition and profits at a time when one of our greatest problems, the rise in the cost of living, is going to affect us so greatly. I believe the Government would be able to effect a net saving of millions of pounds to the population of this country.

§ Mr. Rhys Davies
Do I understand the hon. Member to suggest that the whole of industrial insurance should be nationalised? If so, can we have an assurance that we should have the support of the whole Liberal party vote?

§ Sir R. Acland
I have spoken on one or two occasions since the war began, and whsle there is no reason why the hon. Member should pay any attention to what I have said, I did my best to make my position quite clear. I have said some things which probably are not in accordance with the official policy of the Liberal party. But with a rise in the cost of living and the possibility of inflation we might at this time and by this policy have been able to save anything up to £10,000,000, which is about one-fifth of what the Chancellor of the Exchequer is having to spend in an effort to keep the cost of living down. I am not convinced that we are going to get out of this war until that principle has been fully accepted by the country. Therefore, I am disappointed that the party above the Gangway do not propose to take up that point.
Having said that, let me put one or two points on the question of two years. If that cannot be shortened to one year, may it not be so altered that the provisions of the Bill will take effect two years after the policy was entered into, whenever that might be? We may have to think in terms of two, three, four or five years of war. If a man takes out a policy on 1st June, 1935, at the end of June, 1941, the provisions of this Bill will begin to affect his policy, so that if after that date he gets called up and is not in a position to pay his premiums, if he has paid his premiums in the meantime, he is then able to apply that the advantages of the Bill should be applicable to his case. There is a small point in Clause r. In the majority of cases where notice is sent out after the passing of the Bill the policy holder is to be reminded of his rights by the insurance 1190 company. That is done, I imagine, because it is assumed that all these policy holders will not know the provisions of the Bill. Would it not be a logical consequence, in relation to those people whose circumstances are as set out in the provisions of the Bill, that the insurance company should be required to send them some kind of reminder, saying that although they have cancelled their policy because the premiums have not been paid during the last few months, they draw the policy holder's attention to the fact that he has certain rights under the Bill? Is not that reasonable? The policy holder otherwise will live in ignorance of the fact that his policy has been cancelled.

§ Mr. Bevan
There will, of course, be an opportunity of discussing these various points in Committee, but I think it is appropriate to raise one or two matters now. I rise with considerable diffidence, because it seems to me that everybody is agreed on this Bill and that Parliament has just to put its rubber stamp upon an agreement which has been reached by interested parties outside. The right hon. and learned Gentleman repeatedly assured us on this point, and, therefore, I feel that as a Member of Parliament I am rather interfering with the harmony. I agree with the hon. Member for Barnstaple (Sir R. Acland). I hold the view that the insurance system of this country is a vicious one and is having most unfortunate effects upon trade and industry and upon politics. It is exercising an influence upon politics which is wholly bad and upon the financial structure of industry which is becoming disastrous. It is recruiting millions of pounds from the policy holders of the country and investing the money in industry, particularly in debenture shares, and is obtaining an influence on the industrial policy of this country which is wholly bad. Anyone who knows anything about industry knows that it is high time that the whole of this industry was brought under the ownership of the State.
There is no industry which lends itself less to private profiteering than the insurance industry, and no industry which is so protected by the State. The fact that the benches opposite are empty is an evidence that the great insurance in- 1191 terests, which are well represented in this House, consider that the Bill protects their interests. We should have seen a much more animated scene if the Bill really protected policy holders at the expense of insurance companies. I know the names of Members of Parliament who would have been present to see that the insurance companies were adequately defended against any onslaught. I should like to ask the Attorney-General a question on Sub-section (2) of Clause 3. It says: The interest chargeable on unpaid premiums shall be compound interest at the rate of 3 per cent. per annum with half yearly rests. Do I understand the position correctly? If it is a policy to make payments on an endowment policy, this provision makes a standstill, and then where the period of grace extends for five years the endowment policy is then automatically extended by five years, and the premiums fall to be paid at the end. Am I right in assuming that the insurance company is entitled to charge 3 per cent. compound interest on the unpaid premiums for five years?

§ The Attorney-General
No. The 3 per cent. compound interest arises only under paragraph (a), that is, when there is an actual claim.

§ Mr. Bevan
It arises where a claim falls due, and if during the period of grace the endowment falls to be paid, then 3 per cent. compound interest shall be charged upon the unpaid premiums. It means that if the period of grace is altered over the two and a half years and the claim falls due to be paid, the 3 per cent. compound interest shall be charged on the unpaid premium of the two and a half years. Why? I do not understand it. The insurance company has had the benefit of the use of other money for those two and a half years.

§ The Attorney-General
The compound interest does not apply to money which has been paid.

§ Mr. Bevan
Yes, I have said so. Compound interest is to be paid to the insurance company on premiums which have not been paid. Why? The insurance company during the two and a half years has enjoyed the benefit of the premiums which have been paid. I see the Solici- 1192 tor-General shaking his head. Suppose there is an endowment policy payable at the end of 20 years or on death. Suppose the person has enjoyed a period of grace, but dies, not at the end of the two and a half years, but at the beginning of the two and a half years. The insurance company would have to pay the whole of the death policy. Why should it pay less because the person dies within the two and a half years' period of grace? All that really happens is that the poor fellow has died while enjoying the period of grace. If he had died at the beginning, there would have been no deduction at all. Therefore, the effect of the period of grace is to make an unwarrantable deduction in the amount of payment. Why? I do not follow why it should be so. I can see an insurance company putting up a case, but it does not seem to be as strong a case as that of the insured person.
I rose merely to put those two points, which I should like to have cleared up. I am sure that the insurance companies would be able to show that they had held the money during that period of grace, and they might call it a liability because they had had to hold it ready to pay out. Nevertheless, it seems to me that in this case the insurance companies are having more protection than the insured persons get. Unless the Attorney-General can answer that point satisfactorily, I am afraid there is likely to be considerable discussion of it in the Committee stage.

§ The Attorney-General
I should like to begin by making a passing allusion to the remarks made by the hon. Member for Ebbw Vale (Mr. Bevan) at the beginning of his speech. He suggested that I had given the House to understand that an arrangement had been arrived at and was being placed before the House. In reply to the hon. Member, it seems that if a Minister, in introducing a Bill, mentions that he has had discussions with people who might be able to help him, then some hon. Member gets up and says, "This Measure is the result of consultation with the interests involved, and it is a procedure which is turning the House of Commons into a mere rubber stamp." On the other hand, if a Minister has not had any such discussions, he is told that it is an insult to the House that he should come to it without having taken the 1193 trouble to find out what the interests concerned think about the Measure. That simple and elementary rule of deba[...]e seems to me to be a reply to the hon. Member's observations.
I should like now to make a general observation with regard to the speeches of the hon. Member for Westhoughton (Mr. Rhys Davies) and the hon. Baronet the Member for Barnstaple (Sir R. Acland). They talked about private interests. There is always a certain moral satisfaction in talking about private interests, but I would remind hon. Members that when one is dealing with friendly societies, and so on, one is not dealing with bloated millionaires lolling on the Riviera, drinking champagne and smoking cigars. One is dealing with money in which all the policy-holders have an interest. Therefore, when it is said that in considering this Measure, the House must consider the policy-holders, I quite agree. It is because we have been considering the policy-holders that we have brought forward the Measure. But one has to consider not only those policy-holders who have been adversely effected by the war; one has to consider other policy-holders as well, for they have just as much right to be considered, they are just as much members of the public, and just as much ordinary people going about their vocations. The problem in regard to this Bill—and it is a problem which I hope we have solved reasonably fairly—is to see that, while giving some protection which they would not otherwise have to people who are adversely affected by war circumstances, we do not unreasonably jeopardise the interests of the other policy-holders who are equally entitled to have their interests safeguarded.

§ Sir R. Acland
If the whole of this business were taken over by the State, and enormous economies thereby effected, no individual would lose any money out of it, and there would be no question of compensation to anyone.

§ The Attorney-General
If that were done, a very large number of employées, and so on, who are at present carrying on this business, would lose their livelihood.

§ Mr. Bevan
That is a bad and immoral argument.

§ The Attorney-General
If the hon. Baronet the Member for Barnstaple thinks 1194 that nobody would be any the worse off if that were done, he is making a mistake.

§ Sir R. Acland
Nobody other than those employed in the business.

§ The Attorney-General
The hon. Baronet thinks that the policy-holders might benefit; but surely, we cannot discuss on this Bill whether it would be a good thing or a bad thing for the State to take over the whole of the business at present carried on by the insurance companies and friendly societies. What we have to discuss in the Second Reading Debate on this Bill is whether, under the existing structure, the arrangement is a reasonable one for the policy-holders who are suffering hardship.
Having made those preliminary observations, let me deal with the points that were raised by the hon. Member for Westhougton. He asked why the amount of £50 has been selected. The reason is that it was felt that somewhat greater protection should be afforded, as was done in the last war, in the case of policies for small amounts. In the last war, a flat figure of £25 was taken, but in this Bill we have taken the somewhat larger amount of £50. Under the provisions of the Bill, slightly greater protection is afforded in the case of these policies than is afforded, for instance, under the general scheme of life policies. Consequently, if we give rather greater protection in the case of the small policy, we are faced with the problem of the policy over £50 which is also an industrial policy. How does such a policy come into the scheme, the broad outline of the scheme being this Bill and the arrangement made with the ordinary life insurance company?
I have made inquiries about this. Of course, the complication arises because of the fact that since 1914 Parliament has legislated with regard to industrial policies and has given the industrial policy-holder, whatever may be the amount of the policy, certain rights which the ordinary policy-holder in a life insurance company does not have. The relevant right is that given under Section 24 of the Act of 1923, by which, if a policy has been in force for five years, and in some circumstances for three years, the policy-holder can get a free paid-up policy representing the surrender value. That is not a right which the ordinary person has; although he may get it, it is not a right by Statute. In 1195 fact, all the industrial insurance companies and friendly societies by arrangement grant it in the case of life policies, sometimes after three years, but in nearly all cases after two years. Therefore, the holder of an industrial policy for over £50 has already been given by Parliament, not quite the same, but a somewhat equivalent, measure of protection to that which the ordinary life companies have agreed to give to people under the scheme which I have referred to. It would be difficult and indeed impossible for the industrial companies to say that they would treat policies of over £50 on exactly the same lines as the ordinary life companies treat non-industrial policies. They cannot say that because Parliament has compelled them to give their policyholders certain rights. I think it is not inaccurate or unfair to say that under the statutory provisions the industrial policy-holder having a policy of more than £50 will get a reasonably square deal in that he will get a paid-up policy if he is unable to pay his premiums on account of the war.

§ Mr. Glenvil Hall
Only after five years, or, with the consent of the company, three years.

§ The Attorney-General
Actually, I am told two years, but the ordinary non-industrial policy-holder has not got a statutory right. We felt it was right that there should be special and rather greater statutory protection for the small policyholder. The question arose as to what should be done with regard to the larger policy-holder who also happens to be industrial. As I have explained, I think he probably gets as reasonable a deal as the ordinary person who has a life policy with an ordinary company.

§ Mr. Hall
The point I want to make is this: if the companies are in nearly every case making the limit two years, why not put that period in this Bill?

§ The Attorney-General
Perhaps I have not made myself clear. The Measure gives a special period of protection from forfeiture in the case of the small policy. The right under Section 24 of the Act is not a provision against forfeiture. It is a provision that, although a policy is forfeited, the holder gets a free paid-up policy calculated in a certain way. I was explaining that it was not thought 1196 right to extend the special measure of protection beyond the amount of £50. That leaves the case of the industrial policy-holder with a policy of more than £50. I have told the House what is the position. Such a man has his statutory rights, and it would be difficult for the companies to treat him in exactly the same way as non-industrial policy-holders are treated under the voluntary scheme, because the Statute has, as it were, butted in and given him certain rights. The hon. Member may agree or disagree, but I think that under that statutory right as it is, the industrial policy-holder whose policy is for more than £50 gets a square deal and as reasonably fair treatment as an ordinary policy-holder would get under the voluntary arrangement.

§ Mr. Shinwell
Is not this the position? In the case of industrial policies exceeding £50, the provisions that have been made entitle the claimant to receive what in the opinion of the registrar and the actuary ought to be provided. That is the principle underlying the arrangement for policies over £50.

§ The Attorney-General
Yes. Therefore, I do not think he will be unfairly treated if he is not brought under the Bill, because the Bill gives special protection to small policy-holders. The second question I was asked was whether the Commissioner would go on circuit, and the answer is, "Yes." The third question put to me had reference to the period of two years. That period was taken in the last war and, on the whole, I think it is a fair one. These things have to be decided with reference to legitimate help to people who are suffering hardship and the legitimate interests of the main body of policy-holders. A policy of this kind does not really get any surrender value until after the second year, and therefore, the period adopted in the last war is the one that has been taken this time. One would, of course, like to make it smaller when one has in mind the hardship involved, but when one bears in mind the interests of the other policy-holders, I suggest to the House that the period of two years is a reasonably fair one.
The hon. Gentleman also raised the point that the 28 days might be too short. That is rather a Committee point but I shall certainly look into it. The hon. Member for Colne Valley (Mr. Glenvil 1197 Hall) has raised the question about the £50 limit, and I have tried to explain that already. He also said that Clause 2 (3) gave the Commissioner great power and wanted to know whether I agreed with that. That is a matter which could always be debated but the question here is simply whether the failure to pay is or is not due to circumstances arising directly or indirectly out of the war. No doubt there are possible complexities involved in legal proceedings, which might be avoided by the more informal procedure which the Commissioner can adopt if he has full powers to administer an oath and to take evidence on oath. He is a person on whom Parliament has previously conferred quasi-judicial functions in that he has to decide matters in dispute in connection with the Post Office Savings Bank. He has to examine, for instance, the circumstances of applications for the withdrawal of savings for the benefit of infants. I mention that as a somewhat similar case to this.

§ Mr. Glenvil Hall
Is that not nearly always a question of fact?

§ The Attorney-General
I think this would be a question of fact too. I think that an inquiry into the circumstances in which an application is made for the withdrawal of savings for the benefit of infants, is not unlike the class of inquiry contemplated here. That is a matter which might be argued, but we think that the tribunal which we propose here will be satisfactory, and a good many of those who have been consulted take the same view, though probably I should be unable to convince the hon. Member if he takes a different view.

§ Mr. Buchanan
Do you think that the office will be able to undertake the work?

§ The Attorney-General
Yes.

§ Mr. Buchanan
With all the work that is on it at present? Great difficulty is found in getting hearings as it is.

§ The Attorney-General
I cannot think that there will be many cases in which companies or friendly societies are likely to refuse where the failure to pay is due to circumstances arising out of the war. This is a matter in which one expects sympathetic administration. At any rate the Commissioner is satisfied that he will be able to deal with such applications as may come forward. The hon. Member 1198 for Colne Valley also asked why the matter covered by Clause 2 (3) could not be put into a Schedule. We considered that. We thought of one or two cases which might be dealt with in that way but very complicated questions may arise when you seek to apply the existing rules, say to a mixed life and endowment policy where there has been a period of protection and arrears of premium and the man dies before any other premium has been paid. I quite agree that a wide discretion is left but we felt that it was really better to empower the Commissioner to adapt the existing rules with modifications to the new and not altogether forse[...]able cases which may arise under this Bill.
The hon. Member for Barnstaple asked whether the companies would lose any money. That is a difficult question. Of course they may. The finance of insurance is built up on the assumption that premiums come in, in respect of every life and risk. In this case, during the period of protection, a company may be carrying a number of lives and risks in respect of which it is not getting in any premiums. These are questions on which I would be very loth to be dogmatic, but I would point this out to hon. Members. If the war goes on for three or four years or even for one or two years, and if a protected policy is carried on for one or two or three years and there are arrears and the arrears are then paid up, the policy holder is treated in that case as if he had paid the premiums punctually. But if he had paid them punctually, they would have been earning compound interest for the company during that time. In that way it may be said that some financial burden is placed on the other policy holders.
The hon. Member for Ebbw Vale asked why it should be compound interest. The answer is that the basis of insurance contracts is that the capital value of a policy is built up, not only out of the sum which is paid each year by way of premium, but also out of the interest which those sums earn. For instance, if I pay £100 when I am 21, I believe that would produce something like £400 by the time I am 65, or on my death. The money earns interest and the interest is reinvested and it accumulates for my benefit. Therefore when a company pays a policy in respect of which premiums have not been paid for a certain period, 1199 it is clearly entitled to deduct compound interest. Take a case of half-yearly premiums, for instance. If a man had paid his premium of £5 in June, 1940, the company would have invested it, and it would have earned interest, and that interest would have been reinvested, and the proceeds would help to pay the policy at the end. Therefore, if you ask the companies to pay on policies in respect of which premiums have not been paid for some period, they are entitled to deduct the sum which ordinarily would have accumulated as against that policy, with the premiums.

§ Mr. Bevan
I cannot have made myself clear. I am sufficiently familiar with insurance to know the application of the principle of compound interest throughout the insurance world, but I am bound to say that I do not see how it applies to the case raised by me. The point which I put to the Attorney-General was this—and it applies only to those cases in which a person dies during the period of grace. If such a person died at the beginning of the period of grace the insurance company would still have been liable for the whole of the death payment. But if he dies at the end of the period of grace then the claimant loses compound interest upon the premiums which have not been paid in the meantime. That seems an astonishing procedure.

§ The Attorney-General
I do not think it is. When the actuarial calculations are made, it is recognised that if you take a group of lives, a certain number will die each year, according to the age group. A person who died immediately after the period of protection has started, would be one of a group calculated as likely to die then. Therefore claims to that amount would have been anticipated and provided for in the original financial calculations on which the amount of the premium and policy are based. But those calculations do not provide for paying a claim, say, in the third year, in respect of which no premiums had been collected in the mean-time and in cases in which premiums have not been paid, the claims would be for money which had not been provided for in the original calculation. It has not been provided for to this extent—that the premiums not having been paid, have never earned the compound interest which 1200 ordinarily they would have earned, as against the claims in that group.

§ Mr. Bevan
I can see that.

§ The Attorney-General
If the hon. Member regards this as a question of groups of lives rather than one of individual lives, I think it will be clear. I have done my best to answer the various questions which have been put, and I hope the House will now allow us to have the Second Reading of the Bill.