INDUSTRIAL ASSURANCE (Hansard, 22 February 1944)

§ Mr. Molson (The High Peak)
I rise to ask the Chancellor of the Exchequer to explain more fully than he did in answer to my Question on Tuesday, 25th January, why the Industrial Assurance Commissioner, for whose activity or inactivity he is responsible to this House, is conniving at the existence of large numbers of industrial assurance policies, illegal under the Industrial Assurance Acts, 1909 and 1923. Ever since the Act of 1774 it has been the consistent policy of Parliament not to allow the insurance of the life of another unless there be an insurable interest in the life of the person insured. The only excep- 796 tion which was allowed was assurance for funeral expenses where the premiums were received by collectors who received them more frequently than every two months. It was, indeed, a special narrowly defined exception to the general rule of law in order to enable the poor to provide against pauper funerals for their closest relatives. With the passage of time these restrictions came to be disregarded, and when the present Prime Minister became President of the Board of Trade in 1909 he found, and here I quote his own words, that: out of 35,000,000 policies … in existence, upwards of 10,000,000 were technically void. He at once dealt with the matter in a typically realistic way. He introduced a Bill to whitewash those who had transgressed innocently, while at the same time re-establishing the law on the old foundation, which was slightly extended. In the first place, his Act of 1909 legalised retrospectively those illegal policies which had been bona fide taken out by certain close relatives who might have expected to have to pay the expenses of the funeral of the person insured. In the second place, with regard to the future, the Act provided, and here again I quote the Prime Minister's words: it is permissible within the limit of reasonable funeral expenses for a person to insure himself against the death of a brother, sister, parent, grandparent or child". The intention of this House to confine quite narrowly life-of-another industrial assurance was made clear beyond any doubt on the Committee stage. The late Keir Hardie moved to leave out the limiting words "funeral expenses" and to insert the words "on the life" which would, of course, have made the effect of the life assurance quite general in scope. The Prime Minister resisted the Amendment and resisted with these words: I regret that I cannot agree to the Amendment, the effect of which would be … that they would have power to insure without the limit contained in the Bill. … To extend the insurable interest so widely would be to repeal the Gambling Act of 1874 so far as industrial assurance companies are concerned. The Amendment was, by leave, withdrawn. [An HON. MEMBER: "The Act of 1774."] No, 1874. There were the Life Assurance Act, 1774, and the Gambling Act, 1874. The cases of Wolenberg against Royal Co-operative Collecting Society, and Goldstein against Salvation Army Assurance Society, have shown that, in the view of the courts, the 797 words of the Act were effective to restrict the sum recoverable to reasonable funeral expenses actually incurred. So the position is this: A Bill was introduced by the present Prime Minister, it was carefully debated in Committee in this House, and it has been interpreted by the courts, and the intention of Parliament was effectively enacted that the only expenses recoverable would be actual funeral expenses actually incurred.
What do we find is actually happening? The most striking revelations were made by Sir George Robertson, K.C., in his evidence before the Cohen Committee in 1931. This gentleman was the Industrial Assurance Commissioner from 1923, the year in which the office was created, to 1937, and is now a director of the Prudential Assurance Company. Here let me say that it seems highly undesirable that a civil servant who has administrative and judicial responsibility for the supervision of industrial assurance should, after retirement from the Government's service, become a director of one of the companies concerned. Sir George Robertson, in his written evidence, said: There appear to be an enormous number of policies purporting to be legal but in fact illegal. These policies purport to be for funeral expenses, but in fact, except in the case of parent and child, the proposer in almost every case has no expectation of incurring, much less any legal liability to incur, any funeral expenses on the death of the life assured. Later on the then Industrial Assurance Commissioner gave verbal evidence. He was asked by members of the Cohen Committee whether since 1909 the previous practice had gone on. He answered: As far as I know, the practice is exactly as it was before 1909. In reply to another question, Sir George said: There is gambling on these policies, assuring bad lives the same life in various offices for funeral expenses in them all. Further, they may have no prospect of incurring any funeral expenses. … I came across a case where there were policies for a total of £400 effected on one old woman in a workhouse in Wales; they had all got a bit on her. She was probably buried by the parish. This witness was the official responsible, under Section 2 of the Industrial Assurance Act, 1923, for enforcing the penalties prescribed by Section 39 for contravention of the provisions of the Act. He not only explained very lucidly the provisions of 798 the law, but he also made it plain to the Committee that he was neglecting to enforce the law. When I drew the attention of the Chancellor of the Exchequer to this matter, on 25th January, the Chancellor, while admitting that no prosecution had been undertaken in the case of the very large number of policies which might have contravened the law, added: But the Commissioner brought the matter before a committee appointed in 1931 to report on the law and practice relating to industrial assurance."—[OFFICIAL REPORT, 25th January, 1944; col. 534, Vol. 396.] If the Chancellor thinks that an official responsible for enforcing the provisions of the law is adequately discharging his duty when he gives evidence before a Committee, and explains lucidly the provisions of the law and that the last Act passed by Parliament is not being observed, then, with the utmost respect, I disagree with my right hon. Friend.

§ Mr. Bowles (Nuneaton)
Will the hon. Member explain to the House what he thinks, and what the courts think, are funeral expenses? Is the cost of a gravestone, for instance, funeral expenses?

§ Mr. Molson
I am not going into that. The matter of a gravestone is a matter to be considered by the courts dealing with the case. But there is a fact which the hon. Member should not deny—and if he does he will find the courts against him—that provision for expenses is confined to actual funeral expenses. The Chancellor of the Exchequer, in giving that reply and seeking to put the responsibility on the Cohen Committee, really incriminated all his predecessors and himself, because the Cohen Committee did recommend certain amendments of the law in order to bring to an end this extraordinary state of affairs, and neither any previous Government nor this Government have acted upon it. Eight years passed, and then Sir William Beveridge drew attention to this continuing scandal, and all that the right hon. Gentleman the Chancellor had to say on the subject, on 16th February last, when he announced that the Government were not going to accept the recommendations of Sir William Beveridge, was: The view of the Government is that, with the other proposals of the Report, they have quite enough on hand."—[OFFICIAL REPORT, 16th February, 1944; col. 1676, Vol. 386.] I am sure that my right hon. Friend the Financial Secretary will agree that the 799 matter can hardly be left there. I thought he would welcome an opportunity of explaining to the House exactly what the Government's attitude is about the enforcement of Section 39 of the Act of 1909. He must be aware that there is a very widespread uncertainty as to why it is that the existing provisions of the law have not been enforced. There is an impression that there is a sort of tacit understanding that, so long as industrial life assurance offices use their large liquid funds in order to help the Treasury with its flotations and promotions of loans, they will be left undisturbed in the illegal business from which they derive those funds. I hope that the Financial Secretary will be able to give an explanation so as to dispose of any impression of that kind. At the present time it is very difficult indeed to understand why the Industrial Assurance Commissioner is not enforcing the existing provision of the law.

§ Mr. Bowles
Will the hon. Member explain why there have been no cases which have been held to be illegal?

§ Mr. Molson
There has been no case where the Industrial Assurance Commissioner has prosecuted. In the two cases I have stated, there were actions brought by the holder against the industrial life assurance policy company concerned.

§ The Financial Secretary to the Treasury (Mr. Assheton)
The hon. Member has dealt with the matter with his usual clarity and has made it quite clear to the House that he has gone into the whole question with very great care. I am sure we are indebted to him for the trouble he has taken in the matter, which is not altogether uncomplicated. He is quite right in saying that the main business of life assurance in this country is governed by the Act of 1774 which prohibits any person effecting an assurance on the life of another unless he has in fact what the lawyers call an insurable interest. That is clear enough. It is also clear that under Section 3 of the Act of 1923 a person can insure the life of a parent, grandparent, child, grandchild, brother or sister for funeral expenses. Now my hon. Friend pointed out that these policies, which were in fact called funeral expenses policies, were often applied to other purposes, and I am well aware of that. It may be that Section 36 800 of the Act of 1909, about which my hon. Friend has told us, intended that future assurances of the kind he has been discussing should be for funeral expenses only, and whatever Mr. Keir Hardie may have said on the Committee stage, and whatever reply he may have received, it appears that the law has not been made altogether clear between 1909 and 1944.
I took the trouble to look at the various cases to which my hon. Friend referred, because I had been advised in advance of certain points that might be made, but I do not think it is possible to suggest from these that the law is now clear to-day, and there is no doubt that the industrial assurance offices have interpreted Section 36 (1) of the Assurance Act of 1909, and Section 3 of the Industrial Assurance Act of 1923 as giving the range of relations specified a special statutory insurable interest to the extent of their funeral expenses. I cannot agree that the cases prove that these policies are illegal. There are, in any event, millions of these policies now in existence—I believe something like 30,000,000, which is a very formidable figure. There were many millions of them in existence in 1923 when the Industrial Assurance Commissioner—to whom my hon. Friend made some references which I will not pursue further but which I did not altogether like—was appointed. There were already in existence in 1923 millions of policies which my hon. Friend suggests now, and he may be right, were illegal.
What does he, or any other hon. Member of the House, suggest that the Industrial Assurance Commissioner should have done? It was clearly inappropriate to prosecute in millions of cases, and so he did what I think was a very sensible thing; he had the matter brought before the Cohen Committee, over which Sir Benjamin Cohen presided, and the Report of which I have in front of me. That Committee recommended, as I have no doubt my hon. Friend knows well, that subject to certain conditions, policies of this sort should be permitted because there was a general public demand for them. Let me give the House one or two illustrations. Many persons who have no possible reason to expect that they may actually have to pay for the funeral may, nevertheless, have every reason to expect that they will be put to considerable expense if one of their relations dies. Suppose a man who is not 801 very well off, and who lives in Plymouth, hears that his sister in Aberdeen has died. It may well be that it is proper that he should go to Aberdeen to attend the funeral, and that may not only put him to the expense of the journey and of being away from home but also possibly to a loss of work and, therefore, a loss of money. What is more, there are numberless people who feel themselves obliged—and with this my hon. Friend may not agree—to buy mourning clothing, and so on. All those people have a reason which prompts them to make certain arrangements that they shall have some money available if such an event occurs in their family. The Cohen Report therefore is in favour of making legal, if they are not legal, arrangements of this kind with limiting conditions.

§ Mr. Bowles
But surely the Cohen Report does not make any difference to the legality at all: it cannot possibly.

§ Mr. Assheton
What the Cohen Report suggests is that legislation should be introduced—and I am not allowed to discuss legislation—to permit certain forms of insurance of this kind. Sir William Beveridge in his Report—

§ Mr. Molson
The recommendation was that legislation should be passed legalising it. It is not the same thing.

§ Mr. Assheton
It would take much too Long to read it out, but the first recommendation is that the person who is permitted to insure the life of a relative should be given a statutory insurable interest in that life of a sum payable on death not exceeding £20 exclusive of bonus. I do not think we can assume necessarily that because a recommendation to that effect is made, illegality is proved. I do not want to discuss that point. What I am dealing with is the question whether or not such policies are desirable. The Cohen Committee found that such policies are desirable and the Beveridge Report also found that. My hon. Friend suggested that the Industrial Assurance Commissioner has been in some way at fault in not prosecuting. I do not accept that, because the office of Industrial Assurance Commissioner did not come into existence until 1923 and this has been going on since 1909. When the Commissioner was appointed in 1923, millions of these policies were in existence, and to institute prosecutions at that time would not have 802 been the proper way to deal with the problem. What would have been the result?

§ Mr. Ralph Etherton (Stretford)
To draw attention to the illegality of what was going on.

§ Mr. Assheton
I think the proper thing to do was to have the thing examined by a Committee, which he did, and the Committee made certain recommendations. The Beveridge Report also made certain recommendations in much the same sense, subject to certain conditions. I agree with my hon. Friend that the law on this subject should be clarified, but I do not know what view this House would take as to the terms of any future legislation, nor is it possible to discuss it now, but I would have thought that, on the whole, Parliament was more likely to take the view of the Cohen Committee and the view of Sir William Beveridge, than the view which, I understand, the hon. Member for The High Peak (Mr. Molson) holds, More than that I cannot say. If proposals are adopted for death benefit on the lines of the Beveridge Report—and the Government have already made some pronouncement in that connection—I entirely agree that it would be desirable to have the matter clarified, because funeral expenses as such will already be provided for in the social security scheme. I think it would be desirable if the law could be made clearer but my hon. Friend must recognise, as I am sure the whole House does, that there are very important questions of priority in relation to future legislation which may come before the House, and though I cannot discuss that legislation now, I would like to leave him with that thought in his mind.

§ Sir Herbert Williams (Croydon, South)
I wish to say a word or two in defence of my own constituency. The largest factory in my constituency makes the machine which has brought about a greater reduction in the cost of industrial insurance than any other factor. I believe the proprietors are the Prudential Insurance Company, who bought the rights of this machine from America and decided to equip one establishment with it, and it brought down the rate of expenses by more than one-third. As they did not want to be held up by an American proprietor, they thought they 803 ought to make it themselves. It is a very prosperous undertaking. I am not a shareholder, but I am very glad that my right hon. Friend is a very large customer, and that he uses these machines for counting up trade statistics which, in proper times, used to be published. Owing to this complete statistical blackout into which we are now plunged, we cannot discuss certain matters in this House because, on grounds of security, information which the Germans have not the slightest difficulty in getting is denied to us. I ask him to buy more and more of these machines and print the results so that we can have some idea of what is happening. I am sorry to have delayed the proceedings, but I thought Croydon should not be ignored, because it has made such a notable contribution to the reduction of the expense ratio of industrial assurance.

§ Major Thorneycroft (Stafford)
I think my right hon. Friend the Financial Secretary has defended an almost hopeless position with considerable skill. But I do not think his explanation is very satisfactory. It seems to be common ground that a large number of what can only be called illegal assurances have been carried on. When my right hon. Friend was pressed as to why a test case was not brought his answer was that it would be much better to refer the matter to a committee.

§ Mr. Bowles
Why does the hon. and gallant Member say it is illegal?

§ Major Thorneycroft
Because the assurances did not conform to the Acts concerned. My right hon. Friend said that the matter should be referred to a 804 committee. Well, it was referred to a Committee in 1931. Recommendations were made but, so far as I can see, absolutely nothing was done. Surely the matter cannot be allowed to rest there. The report of a committee may be valuable but, as has been said, it does not legalise anything or help anybody unless some action is taken on its recommendations. Therefore, I hope my right hon. Friend will see his way to something being done on these lines in future.

§ Mr. Etherton
It is common ground that a very substantial number of offences have been committed and it seems to me to be profoundly unsatisfactory for the Financial Secretary to tell us that because they are so many it is extraordinarily difficult to prosecute. It seems high time that the Industrial Assurance Commissioner should be instructed to bring at least a test case in order that we should know where we are in this matter and that an end can be put to what is in fact an absolute ramp. It is wholly wrong that because the offences are so extensive and numerous they should be allowed to continue because the Financial Secretary or the Industrial Commissioner feels that it is too big a task to prosecute so many people.

§ Mr. Bowles
Hon. Members on the other side have said that either the policies were illegal or that offences have been committed. They have not produced a single case and yet they are asking for a test case. Why do they make that assumption?

Mr. Quintin Hoģģ (Oxford)
Because the Statute says so.