§ (1) The Board of Trade may, on the application or with the consent of an insurance company to which the principal Act applies,—
- (a) by order direct that, for the purposes of section 3 of that Act (separation of funds relating to certain classes of business) in its application to the company, insurance business of a kind specified in the order, not being ordinary long-term insurance business, shall be treated as being such business; or
- (b) by order direct that, for the purposes of that section in its application to the company, ordinary long-term insurance business of a kind so specified shall be treated as not being such business.
§ (2) An order under this section may be revoked at any time by the Board of Trade.—[Mr. Darling.]
§ Brought up, and read the First time.
§ Mr. Darling
I beg to move, That the Clause be read a Second time.
I hope that the hon. Member for the City of Chester (Mr. Temple) will not refuse to accept this new Clause.
The effect of this Clause is to give the Board of Trade power to permit insurance companies to treat a category of long-term insurance business as business of another class and vice versa. The 836 problem which has arisen here is that we are laying down the new classes of insurance business and covering the whole of the classes of insurance business—putting them under supervision, as it were. Some insurance companies, we understand, may be in accounting difficulties to begin with if they are compelled to separate all their classes of insurance for accounting purposes, and we want, of course, to give the Board of Trade some flexibility here so that we can give a dispensation to insurance companies if they wish to join together certain classes of business on which there are accountancy problems.
I am sure that the Clause is acceptable to the House, and I hope that it will be accepted by the hon. Member for the City of Chester.
§ Mr. Temple
I have had the responsibility of watching these insurance matters as closely as I possibly could, but I do not set myself up as any particular judge of the quality of the new Clauses put forward by the Government. All that I can say is that I do know that this Clause, giving permission for life funds to incorporate other types of insurance, is welcomed by the insurance industry. But I have some detailed comments with regard to the drafting of this Clause and I should like some explanations.
The right hon. Gentleman said that certain other classes of business could be incorporated in the life funds. I know that the normal practice in certain circumstances is to incorporate what is called long-term injury business—in other words, when a person is more or less permanently incapacitated. But as I understand, under this Clause there would be permitted personal accident business as well. I should like to know whether this is the case and whether it includes long-term sickness business.
It is envisaged that an insurance company may make an application to the Board of Trade to be able to carry on this ancillary business alongside its life business. What I should like to ask is; will this Order be extremely definitive as to exactly the amount and type of business which can be carried on within the life funds?
837 Now I would refer to what 1 call a drafting point and this is with regard to revocation. Subsection (2) of the new Clause says:An order under this section my be revoked at ny time by the Board of Trade.I would draw the House's attention to the very different provisions with regard to revocation in new Clause No. 15. In mw Clause No. 15(2) revocation is very much qualified—it "shall not take effect until" certain things happen, but, as far as I can see, under new Clause 14 this revocation can take place at any moment o' time. This, I believe, might create difficulties.
I have in Committee on the Bill pointed out a number of difficulties with regard to insurance, and all the difficulties which I have pointed out I think have been accepted by the Government and have been acted upon subsequently, but we are in great difficulty at the present time be-ca use there is no chance whatsoever, even if I make a good point, of the right hon. Gentleman being able to do anything about it here.
I am concerned about this question of revocation because it seems to me that any big industrial life or life office may well carry on a very large personal accident, personal injury, business within its life funds, and that at some moment of tine the Board of Trade, without any consultation, because there is no provision in this Clause for consultation, may revoke the Order under which that company is being permitted to carry on that business.
What is the situation? Life funds will have within them a large number of policies which will be operative. Will they have to cease to honour those policies? Or will those policies be put in a closed fund? What exactly will happen if there is a unilateral revocation of this Order by the Board of Trade?
Here again, I would draw the right hon. Gentleman's attention to the revocation provision in new Clause No. 15 which are much more co-operative, because new Clause 15 says thatthe revocation shall not take effect untilcertain things happen, untilsuch period as may be specified in the order … has expired; and notice … has been publishedin the Lonon Gazette, and it goes on to say that 838where he does so he shall, within the three days next after doing so, give written notice to the society that he has done so.In other words, new Clause No. 15 envisages the fact that though there is not consultation at least the life office concerned is put on notice of the intention of the Board of Trade. I myself regard this as being a great defect in the Clause.
Another drafting difficulty in Clause No. 14 is that the words "at any time" are used. Surely it would be right to give a period of notice to the company on a matter of this nature? This assurance business which we are talking about is extremely long-term life business, with which is usually written long-term injury business as well, so there should be no particular hurry, and, in any case, the Board of Trade, I do not think, in these circumstances would have to operate in a precipitate manner. I cannot envisage circumstances in which the Board of Trade would have to act in a precipitate manner.
Therefore I cannot understand why this revocation is not qualified in a certain way, and a statutory reference to consultation at least given.
These are my citicisms of the Clause. No doubt the right hon. Gentleman will be able to meet them. However, the two following new clauses that he is to introduce are entirely new. The Life Offices' Association may know about these matters. But the British Insurance Association knew nothing about them. When I tried to find out about one of the other Clauses, not even the Life Offices' Association knew about them, and the secretary of Friendly Societies' Association had very great difficulty in explaining anything about them and said that their object was extremely obscure.
Therefore, we are dealing with matters which are not simple on the surface but are of a technical nature. It would have been very much better had the Government introduced the new Clauses in Committee so that we could have had a chance of detailed consultation with outside. interests and of tabling Amendments. As it is, the new Clauses appeared in starred form only three days ago, and we have had little chance of tabling Amendments to, them. I hope that the right hon. Gentleman will respond to these questions.
§ Sir J. Foster
I think it legitmate to complain about the introduction of the new Clauses and to treat these matters as if it were the Committee stage, because we have not had the information which we should have had in detail.
My hon. Friend the Member for the City of Chester (Mr. Temple) may know in what circumstances companies will find themselves in accounting difficulties. But I should like to know the criteria which the Board of Trade intends to adopt in regard to accounting difficulties. Is it sufficient for a company to say "We are in accounting difficulties", and then it can merge the two classes of insurance?
I should also like to know more about revocation. What are the criteria for revocation? Is it only a matter of the company saying, "We can now get along in accounting by separating these classes."? It does not sound as if that would be the answer. Or will the Board of Trade suddenly say that the Order ought to be revoked for some criteria? I should like the hon. Gentleman to state the kind of instance in which the Order would suddenly be revoked where the Board of Trade had made an Order to say that long-term accident business should be included in life business.
When one is looking at the accounts of a life company, will the fact that an Order has been made be included in the information given by the company? To estimate the situation of the fund it seems necessary to know whether it is borne by the pure fund which has only life business in it or the impure fund which has personal accident business in it. Is there any machinery requiring information about an Order being made to be given by companies? Apparently Orders will be made on the application of a life insurance company. Will there be included in the Order provision that the fact that the Order has been made shall be included in the published accounts? That ought to be done.
I also disapprove of the kind of drafting where one deems one thing to be another. It has been done in the past. The Dogs Act, 1927, deemed the expression "cattle" to include poultry, which, of course, was rather unwise. A judge in the 19th century referred to a case in which it was said that a married man with 11 children was to be con- 840 sidered as a married man with no children and commented that if he knew the case he would not agree with it. It is a very unwise form of drafting to say that one may treat one thing as another.
A new approach ought to be made. It ought to be said that ordinary long-term insurance business shall be treated separately but that—the reasons should be set out in the Act—if it appears to the Board of Trade that for the purpose of accounting in a particular company it is necessary to include other business, then such other business shall be included—not "be treated as such business" because that brings in a completely different philosophical complexion. If one is to treat cows in one way and then one wants to include asses, one says, "Asses shall be included in the treatment". One does not say that asses shall be treated as if they were cows. It is only a matter of drafting, but this sort of thing produces with laymen a very unreal philosophical complexion.
However, the Clause is unamendable. We can only hope that as time goes by the Government will improve their ways in drafting. I agree that 13 years of Tory rule did not often improve these things, but I always hope that some Government will do so. However, it is a long long road.
§ Mr. Darling
I agree with a great deal of what the hon. and learned Member for Northwich (Sir J. Foster) has said. He will remember that during the Committee stage we came to almost a brotherly agreement that what ought to be done with legislation of this kind is to get it sorted out before it is drafted and that some House of Commons Committees for that purpose would probably not come amiss but would improve legislation.
Here we are trying to do good and be helpful. We have received representations on these points and are trying to respond to them, admittedly at the last minute, but I think it far better to make an effort rather than leave out of the legislation altogether the good work that we are trying to do. I shall come in a moment to the drafting arguments raised by the hon. and learned Gentleman when I deal with the substance of the criticisms 841 made by the hon. Member for the City of Chester (Mr. Temple).
The hon. Member for the City of Chester was right in the first question that h 3 raised about personal accident insurance. Under the Clause, the Board of Trade would be empowered to allow short-term personal accident business to be counted as ordinary long-term insurance in certain cases so that the accounting difficulties of the companies concerned could be overcome. Conversely, it could be done the other way round, depending on what the company wanted.
The hon. Gentleman tried to draw a parallel between new Clause No. 14 and new Clause No. 15. What the Industrial Assurance Commissioner is concerned about in new Clause No. 15 is the public who are paying the insurance premiums, whereas Clause No. 14 tries to help companies overcome certain of their internal problems. This comes to the point made by the hon. and learned Member: if one d Des a great deal of switching, how will people know that the switching has taken place? The answer to that is that the new Clause says:The Board of Trade may, on the application or with the consent of an insurance company".Therefore, one would know in the case of a particular insurance company whether and to what extent any change was made in the qualifications. Frankly, we do not see any difficulty here. If difficulties arise, we shall have a chance before long, as hon. Members know, of introducing certain amending legislation in the new Bill.
§ Sir J. Foster
I do not see how a member of the public would know that the company had applied or consented unless there was something in the accounts.
§ Mr. Darling
I do not think that there is a public interest in that sense here. What we are trying to do, as the hon. and learned Gentleman will recollect from the discussions that we had in Committee on the new insurance Clauses, is to make sure that all the insurance companies in this country are absolutely solvent, properly conducted, and so on. Tie vast majority are.
842 4.30 p.m.
To find out whether they are properly conducted—we have given ourselves powers of investigation and the like which have been generally approved—we want also to look at the accounts. In looking at them, the Board of Trade Insurance Department will know whether any changes have been made in the classification of an insurance company. As the fact that in this matter the Board of Trade is in consultation with the insurance industry is a public safeguard, I do not see that any issue of the kind raised by the hon. and learned Member would arise.
§ Sir J. Foster
Would not a prudent person who seeks a policy look at the life funds to see what was the security and the likelihood of profit? Somebody might want to look at the accounts and calculate one table against another and see how the funds had been invested in the past. That purpose would be falsified if one could not tell that the life fund had started with, say, £X and had then had £Y added to it.
§ Mr. Darling
I do not think that the situation would arise in that way. The dispensation will be given not for vast classes of insurance business, but only where, in the case of a particular company, it has a small area of insurance and, if it tried to keep that small area separate, it would get into accounting difficulties. The best thing to do is to let that slip over into another class, perhaps, for the time being this is where the revoking comes in.
If it appears to the Board of Trade that the size of that peripheral business is so greatly increased that it should come into its proper classification, the Board of Trade could make that representation to the company or the company could make representations to the Board of Trade and say, "We no longer require for our accountancy convenience the dispensation which you have given us." I do not think, therefore, that these difficulties will arise.
§ Mr. Temple
I asked what would happen to policies which had been written when a revocation Order takes effect.
§ Mr. Darling
I was just coming to that.
The hon. Member for the City of Chester raised the question of insurance premiums. All insurance premiums must 843 be honoured to the end of the life of the premium. I do not know the technical term; the hon. Member knows more about it than I do. Changes in classification if they are revoked will not affect the premium so far as the customer is concerned.
§ Mr. Temple
I appreciate that. We are, however, dealing with long-term life assurance. The fund may be operating personal accident business alongside life assurance which continues for the life of the person in question, perhaps 50 or 70 years. That closed fund, operating on the basis on which it took the premiums for 70 years onwards, might have a revocation order put upon it by the Board of Trade, when one would think that it had stopped that type of business, whereas it was still carrying it on.
§ Mr. Darling
The new company will, of course, have to honour—as all insurance companies will do, whatever the accountancy procedures—the contracts that it has entered into. I do not see any difficulty. In any event, the Board of Trade is giving itself flexible powers which, I am sure, will be sufficient to overcome any problems of that kind.
§ Mr. John Peyton (Yeovil)
The Minister of State will have to realise that he must be patient with the House, the mental powers of which have been considerably damaged by his right hon. Friend the Leader of the House. I am not aware that the right hon. Gentleman has answered adequately the point made by my hon. Friend the Member for the City of Chester (Mr. Temple) concerning revocation. I concede at once that the right hon. Gentleman always does his best and is exceedingly courteous and helpful, and I hope that he will try to explain the position, at least for my benefit.
The new Clause states that to initiate revocationThe Board of Trade may, on the application or with the consent of an insurance company",take certain steps. It appears, however, that the Board of Trade is not obliged in any way to consult the company. I appreciate that, in practice, the Board of Trade might well as a matter of courtesy consult and notify a company, but the House of Commons would not be well 844 advised to assume that there will be permanently in the Board of Trade a person like the right hon. Gentleman, who would always behave in such a proper and fair manner. Parliament should look carefully at these things and write into the Clause a duty to consult before revocation is made.
§ Mr. Darling
The hon. Member is, I think, labouring a point which does not deserve to be laboured, for the following reason. Board of Trade Ministers may come and may go—and I appreciate the hon. Member's kind remarks about myself—but he will find that over the years, whatever party has been in power, the people responsible for running the insurance department, as with other department of the Board of Trade, have not only been sensible and competent, but have always, as I think that the hon. Member for the City of Chester (Mr. Temple) would agree, been in the closest contact with the insurance organisations.
Whether it is written in or not, revocation means that if the Board of Trade thinks that the peripheral business in any insurance company has become so big that it should now come into its appropriate class and should not be spatchcocked into another class for convenience, the Board of Trade would say that to the company; and by agreement, to suit the company's business—one does not want to place any handicaps on the company's business—at a convenient point the Order would be revoked. Alternatively, as I have said, the company could say to us, "You will see from our last accounts that our peripheral business has now grown big enough to come into a class of its own. We would like this to be revoked."
Although, to begin with, we are trying to help the company by easing its accountancy problems in the way in which I have described, I imagine that many companies will get into further accountancy difficulties unless they make the changes when the peripheral business is big enough for those changes to be accepted.
I feel sure that this will work out satisfactorily, but there will be an opportunity to test it from experience and to make Amendments, if need be, in a further Bill. I do not, however, think that any Amendments will come forward or be suggested by the insurance companies.
§ Mr. Corfield
I hope that I may be able to make a constructive suggestion to the Minister of State. It is clear that as his right hon. Friend the Leader of the House is much more interested in preserving the energies of the House to deal with Private Members' business tomorrow night, we shall not make all that amount of progress on the Bill today. There will, therefore, be plenty of time for the right hen. Gentleman to put down another new Clause, which will not be starred by the time we come to the second day on the Bill.
§ Mr. Corfield
I am not suggesting that it was. There is plenty of time to put d awn another new Clause and get the starring over. It would be helpful to have another new Clause to meet the pints which have been raised by my hon. Friends the Members for the City of Chester (Mr. Temple) and Yeovil (Mr. Peyton).
During our long Committee proceedings, the Committee showed itself sensitive to giving to Government Departments, and not merely to the Board of Trade, powers without any form of right to representation or appeal. Here, a power to revoke at any time is specifically written in. This is something against which we should be on our guard in view of the general attitude of the Committee to that sort of thing. The hon. Member for Westhoughton (Mr. J. T. Price) joined w on a number of occasions in Committee in our objections to giving unnecessarily wide powers. The Board of Trade seems to have taken unnecessarily wide powers.
Another matter which springs to my attention, again at the suggestion of my hon. Friend the Member for the City of Chester, who knows so much more about the details of these things than most of us, is that there is no specific power to vary an Order. I suppose that where the initiative comes from the company an arrangement could be made by which the original Order was revoked and a modified Order substituted instantaneously, but there is nothing in the Clause to suggest that the initiative has always come from the company. It is clear that, although it has to have some kind of consultation before making an Order, 846 the Board of Trade needs have no such consultation before revoking it, and so we could get into a state of affairs in which a company could be faced with a very awkward situation.
I am not suggesting for a moment that the right hon. Gentleman or the officers of the Board of Trade would deliberately set out to be silly, or to put a spoke in the wheel of a particular company, but it is a basic principle of the House that we should not give powers of this sort when they are not necessary, and it is clearly not necessary to give the Board of Trade power to revoke at any time at its whim when the apparent object of the exercise is to help particular companies.
Another question which I find rather difficult—this may be merely because I have not done enough homework, although I have done a lot—is to find out precisely how this Clause, which is really an Amendment to the principal Act and does not come into the Bill, is affected by what may be called the enforcement provisions in the Bill.
If the Board of Trade is to police a company in respect of which an Order has been made to find out whether this division in its accounts should continue or be reversed, one would like an assurance that the powers being given by the Bill will apply to the Clause. If they do not, what the right hon. Gentleman has said as to the Board of Trade keeping an eye on the situation may be impossible to implement.
§ Mr. Darling
Quite frankly, we do not need to spell out any of these powers of the Board of Trade. We are dealing here with responsible insurance companies and what we are trying to do is to help them to get over one or two of their accountancy problems arising from the provisions which we have made and which have been generally accepted and approved for the new classifications of insurance. With this kind of company we do not need any powers to say that if it does not carry out the instructions of the Board of Trade, it may be taken to court or something like that. We must give ourselves some flexibility and some common sense in a matter of this kind.
For those reasons, as the hon. Member for Gloucestershire, South (Mr. Corfield) knows very well, his proposal that we 847 should take back this new Clause and attempt to redraft it is making a mountain out of a molehill. All we are trying to do is to be as helpful as we can to protect reputable businesses.
§ Question put and agreed to.
§ Clause read a Second time, and added to the Bill.