§ Order for Second Reading read.
§ 11.8 a.m.
§ Mr. John Page (Harrow, West)
I beg to move, That the Bill be now read a Second time.
It is an honour for me to move the Second Reading of the Bill and, through you, Mr. Deputy Speaker, I should like to convey my thanks to Mr. Speaker for exercising his impartiality with characteristic consideration and brilliance by choosing my name first out of the hat for presentation of a Private Members' Bill. I thank my hon. Friends who have agreed to act as sponsors of the Bill, and I also thank the hon. Member for Battersea, South (Mr. Perry) and the hon. Member for Colne Valley (Mr. Wainwright) for their support.
The Minister and I must have had our horoscopes meeting this week, because it is extraordinary that in the same week as the Minister has produced his Green Paper I have produced my Bill. That is a happy omen, and I hope it will mean that I shall receive a degree of support from the Government for what I am trying to do.
I have no business connections with the insurance world or the insurance broking world, although I have found that I still receive £8 annual commission on a family insurance that I took out about 20 years ago. I have, therefore, had much to learn during the past four weeks since deciding on the Bill. I hope that I am now between the stage of the 11-plus and O-levels in the study of insurance broking. But I do not apologise for being an amateur, because Private Members' Bills offer an opportunity for hon. Members to take up subjects of which they have no preconceived notions or prejudices. That means that one is able to take a totally impartial attitude in considering all the arguments relevant to the Bill.
I have discussed the proposals in the Bill with the giants of the insurance broking world, with single operators, with parliamentary colleagues and with ordin- 1858 ary men and women in the street who are concerned with their own family insurance. I hope that if the Bill is given a Second Reading today and sent to Committee, hon. Members who will have listened to me from de novo to ad nauseam will accept that all I say is in the best interests of the country, of those who take out insurance and of those who make their livings by insurance.
Before preparing the Bill, I wanted to be sure that it was necessary and that regulations needed to be made in this sector. I shall give the House an encapsulation of the priorities of the arguments that I found in favour of the Bill. The order of priorities may possibly seem rather strange during this era of consumer protection, but for me the most important aspect of the Bill is that it is intended to reinforce London as the insurance capital of the world.
A few years ago some minor insurance companies were in difficulties, and a surprising and unreasonable amount of tarnish rubbed off on to the rest of the industry. But that is not really surprising, because the industry relies particularly on trust in its operations, and if one is dealing in trust any distrust becomes magnified. A spotlight was focused on the industry and resulted in the Government introducing the Policyholders' Protection Act, which regulates insurance companies. At the same time, the Government asked the insurance broking industry to make proposals for the regulation of its business. The Government suggested that there could be either Government regulation or self-control and self-regulation by the industry.
Accordingly, the broking industry formed the British Insurance Brokers Council. This body comprised all four main insurance broking associations: the Association of Insurance Brokers, the Federation of Insurance Brokers, the Corporation of Insurance Brokers and Lloyd's Insurance Brokers Association. In August the council produced a consultative document containing its suggestions and recommendations. I gratefully acknowledge the immense amount of help and expertise that the council has offered to me in aiding parliamentary drafting and in adding to my meagre knowledge of insurance. The Association of Insurance Brokers and the Federation of Insurance Brokers specialise in representing 1859 smaller brokers and sole traders. I am much encouraged by the fact that the members of these four associations together account for 95 per cent. of all insurance broking business. It is a comfort to me that the percentage is so high, and I hope that this will give hon. Members confidence in the Bill. The council supports the lines upon which the Bill has been drawn.
The total turnover of council members is above £4,000 million a year. Brokers play a major part in earning indirect exports for the country, worth £450 million a year, and the industry is also the largest earner of indirect exports. In this connection, I hope that the Bill will be helpful with regard to our EEC position. That is my first reason for producing the Bill.
My second reason comes under the heading of public protection. I do not want to lose the sympathy of hon. Members, but I am not a devotee of the consumer protection industry. I am a great caveat emptor man. The best way for consumers to gain protection is by protecting themselves. If one goes into a shop one week and buys tomatoes that are squishy, and the next week the tomatoes in the same shop are like red golf balls, one should complain to the owner and take one's business away, and not go down the street and find the weights and measures inspector to do the job. I am also a caveat conductor man, because I do not believe in compulsory seat belt legislation. I hope this indicates that, as is well known, I am not an auntie or nanny figure.
It may be asked whether I am right in taking a slightly different view in connection with the Bill, but I strongly believe that insurance is in a special category. It was pointed out to me by a brilliant parliamentary candidate—who will, I hope, be with us shortly—that in buying insurance policies as opposed to buying such items as tomatoes or secondhand motor cars one is purchasing on trust. Therefore, there must be special care in making the purchase.
Insurance is probably the third most important contract that any of us make in our lives. The first is the marriage contract, which is probably the cheapest and easiest contract. Even after my Bill is enacted, there will not be professional indemnity to cover those who take part 1860 in that contract against all eventualities. Then there is the house-purchase contract, which is probably the most important single financial undertaking entered into by most citizens.
Thirdly, we come to insurance contracts. It is more important to obtain good insurance on a motor car than to obtain a good car. The loss of a car will involve a person in expenditure of £500 or £600, but if one has a bad accident one can find oneself in an extremely difficult position. Therefore, the public must have confidence in the way they buy insurance. In the same way as an individual who goes to a solicitor expects to obtain skilled advice about the law, the public should be encouraged to depend on those who call themselves insurance brokers to give dependable advice about insurance. That is what the Bill is all about.
One can obtain insurance in the United Kingdom either directly through an insurance company or its agents or through other independent intermediaries, some of which are brokers. But as the law now stands anybody without experience, qualification or financial backing can set up in business as an insurance broker. Surely it is right that people who deal with large amounts of money and in matters of trust should be expected to subscribe to some minimum standards. I cannot believe it is right that a man should be able to come out of prison on a Monday and put a board on his front gate on Tuesday advertising his services as an insurance broker.
§ Mr. Roger Moate (Faversham)
Does my hon. Friend believe that an individual could come out of prison on one day and then receive agency agreements from an insurance company, without which he could not set up as an insurance broker?
§ Mr. Page
My hon. Friend has great knowledge of this subject, but I should have thought that such a man, whether he had agency agreements or not, could set up as an insurance broker. An insured person could make payments to an insurance broker which might not necessarily find their way to the right destination.
§ Mr. R. A. McCrindle (Brentwood and Ongar)
I wish that the situation involving the granting of agencies by insurance companies were as tight as my 1861 hon. Friend the Member for Faversham (Mr. Moate) seems to imply. But does not my hon. Friend realise that there is a history involving many insurance companies giving agency agreements to people with the minimum of investigation?
§ Mr. Page
I am grateful to my hon. Friend for that intervention, but I do not want to engage in a game of ping-pong over some of these details. The aim of the Bill is to ensure that an insurance broker possesses a degree of expertise and to go in for adequate professional indemnity coverage, with some long-stop compensation fund.
§ Mr. Tim Renton (Mid-Sussex)
My hon. Friend said that there should be an adequate professional indemnity cover. What does he see as the figure of cover involved?
§ Mr. Page
I am grateful to my hon. Friend for listening so keenly to my argument. When I come on to the background and seek to deal with some of the clauses, that aspect will arise at that stage. That will be a more logical method to proceed.
I hope that the Bill will commend itself to hon. Members in all parts of the House because it is firmly based on the principle of self-help and self-regulation. My hon. Friend the Member for St. Ives (Mr. Nott), who is on the Opposition Front Bench, will be delighted to hear—and I hasten to add that I do not wish to become controversial today, because I want to keep the Minister very much on my side, but I have an eye to the future when my hon. Friend may well he sitting on the Government Front Bench—that my proposals do not involve one extra penny of Government expenditure or the employment of one extra civil servant.
In the creation of this Bill, I have tried to satisfy myself that the small man who is already practising or wishes to practise in insurance will not be harmed by my proposals. I have discussed these matters with individuals and organisations representing hundreds of small firms. I hope that the standards which the Bill seeks to set will be such that nobody who wishes seriously to earn his living as an insurance broker will be prevented from doing so, however small his firm may be.
1862 If the Bill goes through, the extra cost to the smallest man involved in insurance might include a cover of £350 per year to provide for an indemnity of £250,000. No doubt the person concerned is probably now paying something towards indemnity insurance. If that figure appears to be too high, there is nothing to stop the small man who is working from his front room from continuing as an agent for insurance companies if he has a history of doing business with them. If he does not wish to register as an insurance broker, there is no necessity for him to do so.
§ Mr. Kenneth Lewis (Rutland and Stamford
On balance I am in favour of the Bill, but I should like to ask my hon. Friend about the situation in regard to rance cover for customers Sometimes that travel organisations that provide insu-business does not go through an insurance company directly. I am a little concerned about Clause 4, which seeks to provide for somebody who is acting for an insurance company who obtains commission. The provision refers to businesscarried on under the management of a registered insurance broker".If every travel business had to carry a registered insurance broker in its offices it would be put in an impossible situation.
§ Mr. Page
My hon. Friend knows a great deal about the travel business, and indeed I had the pleasure of assisting him on a Bill that he introduced. Perhaps this matter could be dealt with in Committee. To instance Thomas Cook, I am sure that such a large organisation would have an insurance department run by somebody who will take out registration as an insurance broker and that business will be done in that way. Would not the smaller business man, as he now does, act as an agent for insurance companies? If that were the case, it would not be necessary for him to go through the process of registering as an insurance broker in order to give this important service to a client. I hope that that is a quick answer to my hon. Friend's question.
Clauses 1 and 2 deal with the establishment of the Insurance Brokers Registration Council. The council will keep a register of all insurance brokers. The composition is outlined in the schedule 1863 and I shall come to that—I believe the word is seriatim—as we go through the Bill.
Clause 3 is perhaps the most critical and important part of the Bill as it deals with the qualifications that will be required of those who wish to trade as insurance brokers. It provides for a variety of qualifications by experience over a period as an insurance broker or working for insurance companies, or experience over a lesser period combined with educational qualifications that will entitle a person to be entered on the register.
§ Mr. Page
No. I beg my hon. Friend not to interrupt me. I was about to say that my hon. Friend the Member for Faversham (Mr. Moate) has said that the requirement of insurance broking is too narrow and that experience in insurance in general should be a sufficient qualification. That is a point that has been backed up by others who have discussed the matter with me. It is something that we should consider in great detail when we discuss the Bill in Committee. I am certain that we shall have the opportunity of doing so.
§ Mr. Moate
I thank my hon. Friend for his courtesy on that point and the courteous way in which he has received other representations. I wished to intervene because he used the words "working for insurance companies". I think he has now clarified that by saying that as the Bill stands it requires work in insurance broking, but that the broader matter will be considered sympathetically, shall we say, in Committee.
§ Mr. Page
These interventions make me extremely glad that I have never been a Minister. It is clear that one has to be so jolly careful about what one says. In fact, I do not believe that my hon. Friend is right. As I read the Bill, if a person has been acting as an agent for a number of insurance companies for a number of years, that is an equal qualification. That is something that has been most carefully put into the Bill. What my hon. Friend really means is "an" insurance company. This is something that we shall examine. I believe that I am right in my appreciation of that point. En Clause 3 there is something of a 1864 proviso about minimum capital requirements. I always find balance sheets extremely difficult to read, unlike my hon. Friend the Member for Daventry (Mr. Jones) who is a great expert. However, I believe that the capital requirements required by a company are pretty minimal. Again, this is a matter that we might discuss in Committee.
It is also said that a person's existing business as an insurance broker must be sufficiently broadly based to allow him to act independently and that he really is a broker and not an agent. The position of Lloyd's brokers is also dealt with, but they are closely regulated under the 1871 Act. There is also a recommendation for a right of appeal from the registration council if it is felt that registration is unfairly withheld.
There is another matter, which will never worry you, Mr. Deputy Speaker. It is said that an individual who applies for registration should be of good character. That is sometimes rather a subjective decision. For example, if Captain Horatio Nelson had had to be registered by their Lordships as being of a good character before becoming an admiral, I doubt whether he necessarily would have been. I should have hated not to have seen him allowed to take such an outstanding part in the Battle of Trafalgar for such a reason. I shall wish to lean upon the Minister's experience of good character when dealing with other Bills.
Clause 4 provides for the maintenance of lists of corporate bodies practising as brokers.
§ Mr. Arthur Jones (Daventry)
Clause 4(2)(b) states:that the greater part of its business consists of activities other than insurance broking and that so much of its business as consists of insurance broking is carried on under the management of a registered insurance broker.This is the point that my hon. Friend the Member for Rutland and Stamford Mr. Lewis) was taking up. Surely it strikes at the very purpose of the Bill in trying to establish the significance of the title "insurance broker". I was interested in the brief that my hon. Friend circulated. It says:if he is seriously inclined to be a true insurance broker".If a person is seriously inclined to be a true insurance broker he cannot really 1865 be in that role as a member of a corporate body that is undertaking brokerage as a sideline.
§ Mr. Page
I take Thomas Cook as an example. Its main business is travel, but it probably has considerable insurance aspects. Would it not be able to have an insurance broking department concentrating on the insurance broking side of its business? That department would be under the management of a registered insurance broker.
§ Mr. Arthur Jones
Is my hon. Friend suggesting that that meets the requirement that Thomas Cook Ltd. is seriously inclined to be a true insurance broker? If a company is to carry the worthy title of insurance broker, that cannot be by an employee of Thomas Cook, for example, even if that person is a registered insurance broker. That defeats the whole purpose of the Bill.
If we allow departmentalism within a large organisation, an engineering firm could be registered with the council if it had a large insurance connection of its own and covered its own insurance. That would be the position if an engineering firm had a registered insurance broker as an employee. That applies to the British Steel Corporation and other nationalised industries.
If there is to be the title of "insurance broker", it must be significant in terms of the commercial world. That title cannot be suppressed by applying it to the sub-department of a trading company.
§ The Under-Secretary of State for Trade (Mr. Clinton Davis)
Is it not right that the two features in clause 4(2)(b) have to be listed conjunctively and that the first part provides that the greater part of its businessconsists of activities other than insurance broking and that so much of its business as consists of insurance brokings is carried on under the management of registered insurance broker."?The second point is that, as I understand it—and the hon. Gentleman will correct me if I am wrong—there is no requirement to obtain the title "insurance broker". There will be no prohibition on other persons carrying on the business of insurance consultancy and advisory work, but they will not have the benefit of a title and be subject to the same 1866 disciplines as those who carry on as insurance brokers. Is not that the right situation?
§ Mr. Page
I think that we are getting into deep water. I see the force of the point made by my hon. Friend the Member for Daventry, but I do not necessarily want to follow along his road. I suppose that Thomas Cook could incorporate a different company called Thomas Cook Insurance Broking Ltd., which would be a subsidiary company. If we then get to the position that insurance brokers must have a majority of directors who are registered brokers, that might lead to complications for the board. My hon. Friend has raised a point that we must note.
§ Mr. Arthur Jones
If I may deal with my hon. Friend's partial defence of his case, one must bear in mind that the requirement of an insurance broker in future will be that he brings an independent judgment to bear on where his client's business is placed. I cannot see that happening in the Thomas Cook example that he gave.
§ Mr. Page
I shall think carefully about the point raised by my hon. Friend, but I am going on with this even though it is taking up a lot of time. Why should not the advice given by Thomas Cook Insurance Broking Limited be as impartial as that given by any other broker? It will be offering, through the broking side, the comparative offers of Lloyds, other insurance companies, and so on. I do not think that it is a tied house for the source of the insurance.
I now come to Clauses 5 and 6, which deal with the approval of education institutions. I am impressed, particularly by younger, self-employed insurance brokers in my constituency and others who have been in touch with me, by the determination of insurance brokers to improve the status of their profession.
Clauses 7 and 8 relate to the keeping of the register and list and the charging of registration fees. I should have thought that this would be sorted out by the council and the Secretary of State over the next few months. There will probably have to be an initial registration fee, and then some kind of annual fee. I suspect that this will have to be graduated according to the amount of 1867 business done by the broking organisations to which the individual registered brokers belong.
Clause 9 provides for a code of conduct which will have to receive the sanction of the Secretary of State, and it requires an order to be laid before the House before the code can come into force.
Clauses 10 and 11 are important because they deal with the keeping of accounts and the professional indemnity insurance. The Bill depends on such insurance being available to the sole trader, which I believe might have been a difficulty in the past. I understand that the insurance world is prepared to give such professional indemnity policies. All the four associations on the council have agreed that the figure, which I suggest as a minimum, should be £250,000. One of the associations has a smaller amount, but recommends £250,000 to its membership. Then there is a long-stop compensation fund, which must be examined in Committee.
Clauses 12 to 19 deal in the main with the investigation of public complaints against insurance brokers and possible disciplinary action. In these clauses there is a proper appeal procedure to the High Court.
Clause 20 deals with certain committees, and Clause 21 restricts the use of the description "insurance broker" to brokers who are registered. Here we come to the rather difficult position of the existing small company, the kind of "sitting tenant". Under the Bill, a two-year period will elapse before these provisions come into force to allow existing insurance brokers to arrange their affairs so that they can register if they wish to, but I am ready to listen to any other suggestions about transitional arrangements.
The other clauses deal with uncomfortable routine matters, such as the death and bankruptcy of brokers.
The schedule is about the composition of the registration council. As one would expect in a self-regulatory scheme, the majority of members are nominated by the British Insurance Brokers Association remembering that 95 per cent. of all broking business is handled through members of the bodies of the association. There are to be three nominations by the 1868 Secretary of State, which will ensure the representation of outside interests, other insurance broking interests and people with experience of accountancy and the law. There is no necessity for anyone who wishes to register as an insurance broker to be a member of one of those organisations.
I believe that the Bill could have contained more about codes of conduct, and so on, but perhaps its size is already rather daunting. Nevertheless, the attraction is that it has been presented and the clauses can be examined in Committee rather than these matters being dealt with in a Statutory Instrument which is debatable but not amendable.
The Secretary of State has published a consultative document in connection with insurance brokers and insurance agents. I hope that it will be felt that the ideas presented by the Secretary of State go arm in arm with the Bill. I therefore hope that the Bill—a large measure for a Private Member to handle—will commend itself to hon. Members on both sides of the House. Throughout the passage of the Bill, if we can get beyond today, I shall listen with the greatest care and interest to points raised both from outside the House and by hon. Members.
§ 11.49 a.m.
§ Mr. David Weitzman (Hackney, North and Stoke Newington)
I think that the hon. Member for Harrow, West (Mr. Page) protests too much. Since he was lucky enough to win the Ballot and announce his intention to bring in a Bill about referenda, he seems to have absorbed a tremendous amount of knowledge about insurance. I congratulate him. He stood up very well to the cross-examination of his hon. Friends today.
The hon. Gentleman has used his luck in the Ballot very well to introduce a Bill which certainly deserves a great deal of public attention. The concern in this area is primarily the protection of the personal consumer, not so much the brokers and insurance agencies. The hon. Member has certainly sought to introduce a comprehensive measure. So far as I can see, he has completely followed the proposals for self-regulation set out in the document produced by the British Insurance Brokers Council and has tried to cover in detail the formation of the council, its constitution, the conditions 1869 for registration, the qualifications necessary, the supervision of educational establishments, disciplinary measures and the penalties for breach of the provisions.
Two questions arise, however, First, is the method devised in the Bill the best way of achieving the main purpose set out in the first paragraph of the Explanatory Memorandum:… to establish a system of registration of insurance brokers so as to ensure that, for the protection of the public, the competence and conduct of practising insurance brokers are of a sufficiently high standard and that their financial resources are adequate.Second, has the Bill been preceded by wide consultation with many interested bodies, so that, subject to any alterations in the Committee, it represents the best means of achieving its purpose?
I know that the hon. Gentleman welcomed the White Paper, Cmnd. 6715, "Insurance Intermediaries", as being produced about the same time or just before his Bill. But it is a little unfortunate that that White Paper was only presented this month by the Secretary of State for Trade. It gave little time for adequate consideration, not only by Parliament but by the many interested bodies. The Bill really follows hard on its heels.
In paragraph 13, the Command Paper refers to the Bill and expresses support in principle, adding, however,… so long as it provides that use of the title 'insurance broker' would be reserved for registered brokers, (whether registered under the BIBC's or any other approved scheme), only after public consultation has been completed and its results satisfactorily taken into account.The British Insurance Association, in its comments on the Command Paper, makes exactly the same point. Referring to the remarks in its own memorandum, it says that they are madeon the assumption that the Bill would be an enabling measure and would not be brought into effect until wide consultation has been completed and general agreement reached in all its aspects affecting various interests.The first difficulty, I suggest, is what is meant by an insurance broker. Can the term be defined in such a way that injustice is not done to many who deal with insurance business? Is there not a real danger—I assume from his political views and from what he said today that the hon. Gentleman is not wholly en- 1870 thusiastic about this—of the creation of a closed shop under the Bill?
An EEC draft directive has defined brokers aspersons who, acting with complete freedom as to their choice of undertaking, bring together with a view to the insurance or reinsurance of risks persons seeking insurance or reinsurance and insurance or reinsurance undertakings, carry out work preparatory to the conclusion of contracts of insurance or reinsurance and, where appropriate, assist in the administration and performance of such contracts, in particular in the event of a claim.I note that the British Insurance Brokers Council, whose provisions are the basis of the Bill, accepts that definition. Yet the Bill contains no definition of an insurance broker. It merely sets out in Clause 3 certain criteria upon which the council must be satisfied before the person can be registered and the penalties under Clause 21 if he uses the name of an insurance broker without being upon the register.
It is true that there is at present no restriction on the use of the term "insurance broker" and that the term can be used by a person who is completely unqualified or inexperienced. I certainly agree that something should be done to protect the personal consumer against such a person, but I am advised that there are about 9,000 individuals or firms practising as brokers, only 3,000 of whom are members of the BBIC.
Clause 3 might enable some of these to be included on the register, but would it cover them all? Might there not be a real danger that a considerable number who were not members of the BBIC would be disqualified and put out of business? Of course in some cases that might be a good thing. In others, it might create real hardship. In any case, this illustrates the need for much greater inquiry. What about the insurance agent—
§ Mr. John Page
This figure of 9,000 is not one that I have seen established anywhere. I think that it is just thought that any travel agent who does some insurance on the side could be considered one of these 9,000. I know that the figure has been given and I tried to get confirmation, but I do not necessarily accept that it is a true figure of those actually practising.
§ Mr. Weitzman
I am obliged to the hon. Gentleman, but I have read the memorandum by the British Insurance Association, which says that there are 9,000 and that only 3,000 are members of the recognised body. That is a point which should be taken into consideration.
What about the insurance agent? Is his position affected? Although he is called an insurance agent, might he not in some cases be regarded as an insurance broker? If he is, will he put out of business or will his business be affected? The Command Paper "Insurance Intermediaries" speaks of causes for concern. I have the feeling that there is much more concern about the position of insurance agents. As the Command Paper says, there is a lack of clear distinction between the insurance intermediary who acts as an agent representing an insurance company and the insurance broker who holds himself out as offering disinterested advice to his client on the cover most suited to his needs.
What about the position of solicitors and accountants, professional people generally who are expertly qualified to give advice on insurance matters and often do give such advice—banks, for example? Has the Bill taken into proper account their position? Are they to be excluded, or is their position to be affected by the Bill?
§ Mr. Clinton Davis
Is it not extremely unusual, if not unprecedented, for a solicitor, whose business is that of carrying on a legal practice, to describe himself at the same time as an insurance broker? Does not that apply equally to architects, accountants and other professional men who carry on practice for that specific professional purpose? Is not insurance an incidental part of their business?
§ Mr. Weitzman
Surely my hon. Friend recognises that although solicitors carry on their legal practice, many of them—and many bank managers and accountants—give expert advice on insurance. It is well recognised that they give advice in that way. As is pointed out in the memorandum submitted by the British insurance companies, the difficulty of that position is recognised.
§ Mr. Ernest G. Perry (Battersea, South)
My hon. and learned Friend says that 1872 bank managers, accountants and solicitors are well qualified to give advice on insurance matters, but that is the last thing he should say. When the trouble occurred with Nation Life many people were found guilty of giving wrong information to clients on insurance matters.
§ Mr. Weitzman
The short answer is that some solicitors, some accountants and some bank managers may give bad advice, but on the whole many are experts on insurance matters and often give excellent advice that is followed.
I want to mention an important matter that I should like to see dealt with in legislation. I should like to put beyond any doubt that an insurance agent, whether he is a broker or otherwise, is the agent of the insurance company and not of the insured person. Cases arise where an insured person suffers damage and has no remedy where he has acted on the advice of the agent and the agent is thought to be the agent of the insured person.
I have in mind a case I recently raised in the House of a passenger who was seriously injured in a motor accident. The insured person acted on the advice of the insurance agent. The result was that the passenger had no remedy in law although he suffered damage that will affect him for the rest of his life.
The independence of the insurance broker is, as the EEC directive points out, a crucial matter, yet the insurance broker may be the subsidiary of an insurance company or dependent on it in some way. What is the position in the Bill with regard to that?
A host of difficult questions arise with which I have not dealt and with which I am not competent to deal. I have not the vast knowledge of insurance of the hon. Member for Harrow, West. I have a little knowledge of insurance law but certainly not his knowledge. The Bill is valuable in arousing and inviting public discussion. It may be a vehicle which can be enlarged and dealt with in Committee so as to cover these matters.
Perhaps between now and Committee such discussion can take place and a valuable Act of Parliament can eventually be put upon the statute book, but there is one danger that I should like to warn against. I warn against what I think is a piecemeal effort. It might be wiser to 1873 leave the matter to the Government so that all aspects can be covered more comprehensively, including particularly the position of the insurance agent.
I shall be interested to hear the advice which the Under-Secretary of State will give, and I conclude by congratulating the hon. Member for Harrow, West on enabling this discussion to take place.
§ 12.5 p.m.
§ Mr. John Nott (St. Ives)
I should like to cover some of the arguments put forward by the hon. and learned Member for Hackney, North and Stoke Newington (Mr. Weitzman), several of which were of great importance. Before doing so, I apologise to the House for rising from the Front Bench so early in the debate. My constituency is further in travelling time from Westminster than is any other in the United Kingdom, and I have to be at an engagement in my constituency at 8 o'clock tonight. That means that I shall have to catch an early train. I hope, therefore, that I shall be acquitted of discourtesy if I do not hear all the speeches. I felt that it was better to speak, and speak early, and then leave than not to speak at all on a very important Bill.
I congratulate my hon. Friend the Member for Harrow, West (Mr. Page) on his good fortune in drawing first place in the Ballot and on the modest, sound and sensible way in which he moved the Second Reading of the Bill. We are delighted that he was successful in the Ballot and I hope that the Bill will have a successful passage through the House.
I wish to refer to certain aspects of the measure and describe some of my personal minor misgivings. I do not emphasise these points for any want of admiration of the magnificent record of the insurance broking industry or of the independence and sound judgment of my hon. Friend. As Conservatives, he and I must be more than usually sceptical about new legislation, however well-intentioned, because our country is already over-burdened by a massive excess of bureaucracy, rules, regulations and new laws. Whether these laws are mandatory, permissive or self-regulatory, as is the Bill, we must still be sceptical, indeed critical, of the need for new laws of any kind.
1874 I should not like this Bill or any other, whether it be proposed by one of my most hon. Friends, as in this case, or by the hon. and learned Member for Hackney, North and Stoke Newington, to obtain a Third Reading in the House without a most critical examination of its provisions in Committee. I know that my hon. Friend will agree with me on that.
Before leaving the general point, I should like to add two comments on this theme. In my experience almost every Bill, whether promoted by the Government or by Private Member, is considered essential by some interested body outside the House, but that same body always joins with vigour in the clamour against the excess of laws that pass through the House.
Secondly, I believe—I share the view with my hon. Friend—that we are departing excessively from the principle of caveat emptor. My personal feeling is that Parliament seems to be endlessly engaged in saving the British people from themselves, in saving consumers from producers and in saving laggards from entrepreneurs. Sometimes it is right, even when we have before us a Bill with which in principle we agree, to sound that warning note.
My hon. Friend did not go through the recent history of how the British Insurance Brokers Council came to prepare the consultative document, and I do not need to do so now. The consultative document upon which the Bill is based is an excellent paper and, given that the Secretary of State invited the broking industry to prepare proposals for the supervision of insurance brokers, the council could not have done a better job. If I had been Secretary of State, I doubt whether the invitation would have been forthcoming in the first place. Nor am I sure that, if I had been the Secretary of State, we would have had a White Paper. That, for the purposes of this debate, is academic.
The Government clearly wish to see increased supervision for insurance intermediaries. The insurance broking industry responded to the Government's approach in a sensible and constructive way. My hon. Friend the Member for Harrow, West was absolutely right to assist the industry in bringing forward self-regulatory rules, which are infinitely 1875 preferable to statutory rules. I support my hon. Friend completely in what he is doing, because nothing but harm could come to the insurance industry from an attempt to control this area of commercial activity by Government-promoted statute. I say to the many thousands who may not be members of the British Insurance Brokers Council that they should consider themselves fortunate that the Bill is in self-regulatory form rather than a Bill promoted by the Department. This is the view of the Department. It favours this area of commercial enterprise being controlled by self-regulation.
The contributions of the insurance industry to our national prosperity is all too little recognised. London is the insurance centre of the world and its contribution to our economy is immense. The total premium income of British insurers in 1975 amounted to over £6,000 million, while the foreign business alone carried out by brokers was more than £1,600 million. I do not know the precise figures for the total overseas premiums received by the British insurance industry as a whole. I doubt whether the total overseas premiums—and I express the figures in gross terms—amount to much less than the total value of exports of our motor vehicles and vehicle components industries. I read yesterday that we exported motor industry products last year worth a record £3,278 million. I suggest that the gross premiums obtained overseas by the British insurance industry are not much less than that figure.
The enormous benefit that the insurance industry brings to our country is concealed by the way in which we present our invisibles in the balance of payments accounts. The invisibles are always expressed in net terms, and when we say that the insurance industry contributed a net £452 million to our invisibles we greatly dilute its real influence upon our economy since we look at the export of goods in gross terms.
I have one brief anecdote. The hon. Member for Battersea, South (Mr. Perry)—I am delighted to see him here—and I shared, with two other notable Members of the House, a parliamentary delegation to Outer Mongolia. It took place in 1970, just after the Conservatives had won the General Election. The hon. Gentleman and I shared a bedroom in 1876 Ulan Bator—a room in which the founder of the Mongolian People's Republic had once slept. We found—I am sure that the hon. Gentleman will confirm this anecdote—that the Mongolian People's Republic, poised as it is in that sensitive and strategic part of the world between Russia and China, had a herd of about 25 million beasts, made up of about 5 million camels, 10 million horses and about 10 million cattle.
We were told by a representative in Ulan Bator, and I emphasise that we were the first Western parliamentary delegation ever invited to Outer Mongolia, that two years before an insurance broker somehow had found his way into Mongolia and had negotiated with the Politburo the insurance of the entire national herd, those millions of beasts roaming across the steppes of Mongolia. I have never been able to find out whether that story was true, but it is an example of the enterprise and initiative of the insurance broking industry and of the tremendous contribution which it makes to our econmy.
I come now to the provisions of the Bill. Initially I was concerned that the annual costs of registration might be detrimental to the one-man business providing a vitally important service to the community in an isolated area. Having studied the figures, I do not believe that that criticism is valid. It is right that someone conducting a broking business in the country, whether or not in an isolated area and whether or not a one-man business, should have professional indemnity cover, which will cost him £300 a year. There is no reason why such a person should not be able to afford the annual cost of registration, which is £25. It is reasonable enough that he should subscribe to a compensation fund costing about £100 a year.
I do not believe that the quality of insurance advice has any relationship to size. The smallest policyholder can often get much better, more friendly and more competent advice from the one-man broking business than from a large insurance broking company. No doubt we have all dealt with both types. I do not say this as a criticism of the industry, but often one can get offhand treatment from the sub-sub-subsidiary of a large broking firm. If, for special reasons, the 1877 single proprietor is unable in a particular year to find the necessary finance—we are talking about £300 to £500—there is nothing, as I see it, to prevent him from carrying on as an insurance consultant or adviser until he can afford the necessary fees and thus be enabled to use the title of registered insurance broker. I am not concerned too much about the question of size.
I am a little more concerned over the qualification aspects. My hon. Friend said that he felt it right that this question should be considered in Committee. I agree. Unlike others of my hon. Friends, I do not have any knowledge of the industry. I have a feeling, however, that the distinction between a broker and an agent—this goes to the point about definition mentioned by the hon. and learned Member for Hackney, North and Stoke Newington—can be very blurred in practice. Many of the large brokers conduct a significant proportion of their business through particular underwriters and insurance companies. They get a return of commission from the campanies and, as far as I know, from the underwriters, whereas a so—called agent could in practice have a wider selection of companies with which he was dealing and could offer an equally wide area of choice to his customers. We are in a difficult area of definition. The whole question of qualifications must be further examined in Committee.
Suppose that a solicitor, an accountant or the agent for say, Legal and General, who was a considerable expert on insurance, decided that he wished to cease his former business and start as an insurance broker. It might or might not be the case that the qualifications possessed by such people are less adequate than those possessed by a filing clerk of 26 who happens to have worked for four years in an insurance broker's office carrying out the administration of his firm. My hon. Friend made an interesting observation about qualifications. No doubt this will be looked at further. These are not objections to the Bill. They merely support the need for good judgment on the part of the registration committee. It will be difficult to maintain proper safeguards on the one hand and on the other to avoid restricting com- 1878 petition or unfairly protecting established brokers.
Paragraph 3 of the White Paper sets out the dilemma very well. It states:In our society insurance is an essential commodity … It must therefore be readily available, and it is right that it should be sold actively.It states that the sellers—in other words, the brokers—should be both knowledgeable and trustworthy. There is a conflict here: the two requirements—maximum availability of the product, and expertise and integrity in those who sell it—pull in different directions".I fully agree that the requirement of maximum availability and the requirement that those who sell insurance should be people of honesty and integrity pull in different directions, and the White Paper expresses very well the dilemma which will face the registration committee.
The House must understand, before the Bill goes into Committee, precisely who are the individuals or firms currently acting as intermediaries. On this point I am not sure that the BIA paper which I read expressed the situation correctly, since it referred to 9,000 brokers. I should prefer to call these 9,000 intermediaries—
§ Mr. Nott
I think my hon. Friend is correct in that in the BIBC document the 9,000 were referred to in that way, but I repeat that in the document of the British Insurance Association the 9,000 were referred to as brokers, and I should prefer to call them intermediaries. I understand that 3,000 or so are members of the British Insurance Brokers Council and that 3,000-plus are expected to qualify for registration. I know that it is not the intention of my hon. Friend the Member for Harrow, West to put any of the other 6,000 or so intermediaries out of business. Of course not, because the majority are practising as agents of insurance companies, are travel agents doing some broking on the side—clearly, they are not brokers—or perhaps they may be solicitors or accountants advising their 1879 clients about insurance. All of these are performing a vital function in the insurance industry, and the BIA document is right in saying that we must be careful that in pursuing the objectives of the Bill we do not narrow too much the range of people who are able to sell insurance to the consumer. I know that my hon. Friend will do his best in Committee to see that that does not happen.
Paragraph 19 of the White Paper concerns me somewhat. As the spokesman for my party, I wish to leave open our attitude towards further moves in this area. We certainly want to give the Bill a fair passage through the House, but I cannot at the moment say what our attitude would be should the Government seek to bring forward statutory controls, as contemplated in paragraph 19, on agents and insurance companies.
I am not sure that we now need to have new laws to bring in controls on agents. We shall have to see how the debate goes in Committee, although it will primarily be concerned with brokers and those who wish to call themselves registered insurance brokers. The point at issue is that my hon. Friend is not stopping consultants and advisers—about 6,000 of them—from practising the business of insurance. All he is saying is that they should not hold themselves out to be brokers when they are performing a different role.
§ Mr. Clinton Davis
It would not be my advice that provisions should be incorporated into this Bill to deal with the vexed question of insurance agents. Should I, however, be right in thinking that there is an area of common ground between the hon. Member for St. Ives (Mr. Nott) and myself, at least in relation to insurance agents? Does he not agree that the law is at present in a very unsatisfactory state and that there is a great deal of uncertainty about where responsibility lies, and that this can have deleterious effects for policyholders? Is it not right that we should look very carefully at how this can be remedied to provide greater certainty and greater relief or remedies where these are necessary?
§ Mr. Nott
I accept that the Department of Trade has a duty to oversee the insurance industry, and I accept that, if there are strong grounds for believing that the agency system is being abused of 1880 is not being adequately controlled by the insurance companies themselves, it is the Government's duty to look into the situation. But unless I am mistaken—I hope that the Minister will correct me if I am—the two most recent scandals, if I may so describe them, for the consumer's interest were Nation Life and Vehicle and General. Those are the two most prominent examples. I think it correct that both would have happened if this Bill or a new Bill for controlling agents had been in force. Although I have a distaste for the excessive legislation which passes through the House—
§ Mr. McCrindle
Even if it be correct that a Vehicle and General or Nation Life situation would still have taken place even if the Bill had been in force, the Vehicle and General situation would not have taken place if we had had the Insurance Companies Act 1974. Is that not a major matter which my hon. Friend is overlooking?
§ Mr. Nott
I cited the cases of Vehicle and General and Nation Life in the context of further legislation to control insurance agents. I do not wish to job backwards and discuss the 1974 Bill, in which my hon. Friend played such a prominent part. Alas, I do not know enough about it to comment, though certainly it may have been right for that Bill to be passed by the House. I was giving those two examples with respect to agency controls.
I have deliberately set out several points which, I know, my hon. Friend the Member for Harrow, West will wish to consider in Committee. They are not new, and the House, I am sure, recognises them as relevant. If any practising brokers are concerned at my hon. Friend's intentions, if any of them think that he is seeking to create another restrictive practice—restrictive practices are not unknown in the professions—they misunderstand his purpose. As Members of Parliament, we all know about restrictive practices. All of us have had 1881 experience—I shall get into serious trouble, but I shall say it none the less—of dealing with the Law Society over many years.
My hon. Friend the Member for Harrow, West is the last person in the House to create a new restrictive practice for the professions, and if people accuse him of trying to drive the small man out of business they do not know their man. The small man, we know, will be safe in my hon. Friend's capable hands in Committee.
I certainly wish to give the Bill a Second Reading, subject to serious consideration being given to the points which have been raised. I hope that the House will give it the support needed to send it on its way today.
§ 12.30 p.m.
§ Mr. Edward du Cann (Taunton)
I am sure I speak for the whole House when I say that I hope very much that after the next General Election neither my hon. Friend the Member for St. Ives (Mr. Nott) nor the hon. Member for Battersea, South (Mr. Perry) will be sent immediately to Outer Mongolia.
I mean no disrespect to the Minister, for whom I have the highest personal regard, if I say that I hope it will not be long before my hon. Friend is unable to say "If only I were Secretary of State". I hope that my hon. Friend will be Secretary of State and that his undoubted and substantial talents will be bent as they should be in the service of our nation.
I agreed with my hon. Friend when he said both directly, in quoting examples several times and indirectly that there were inevitably a number of ironies in the Bill and in the subject which we are discussing. Not the least of them, as the hon. and learned Member for Hackney. North and Stoke Newington (Mr. Weitzman) indicated in his penetrating analysis, derives from the fact that the House is not necessarily at its fullest when it is debating a matter of obvious public importance.
There are many matters about which we can agree in discussing the Bill. Every speaker so far has done what I should now like to do, which is to add my congratulations to the many that my hon. Friend the Member for Harrow, West (Mr. Page) has received on his success 1882 in the Ballot. I am sure that everyone will wish to congratulate him, too, on the typically engaging manner in which he made his speech, which we so much appreciate.
My hon. Friend has shown great enterprise and some courage in producing this Bill, because it is really a matter which should be for the Government rather than private Members to legislate upon. None the less, we recognise the great constraints on Government time.
In introducing the Bill my hon. Friend has performed a public service, and I shall support him all I can. I hope that he will be successful. That does not mean that I disagree with what my hon. Friend the Member for St. Ives said about the plethora of complex legislation for which we in this House are responsible and which we inflict upon an unwilling public. If ever there were a moratorium much to be desired, it is a total moratorium on legislation of any sort for a year or two.
There is another reason why my hon. Friend the Member for Harrow, West deserves to be congratulated. As my hon. Friend the Member for St. Ives pointed out, the debate gives a welcome opportunity to pay a well-deserved tribute to the insurance broking industry for its service to the British economy and the British public.
I should declare two interests. First, I am chairman of a life assurance company in the United Kingdom. I became its chairman at a very difficult time in its fortunes, a time when no one else in the United Kingdom was willing to put strength and support behind it. It was having a difficult time through no fault of its most competent United Kingdom management. I assumed that responsibility at a considerable financial sacrifice. I am very proud of what we have achieved for the company. It is prosperous and it is a model. No greater compliment could be paid to it than if I say it is very much engaged in the marketing of life assurance to members of trade unions and has played a part in a number of rescue operations.
I am obliged by the conventions of the House to mention the matter, but I should do so anyway for the following reason in particular. That company is an employer of a large number of insurance salesmen. 1883 We call them associates. They are competent, well-regulated and active in the field, in touch not only with members of the public but with members of the broking profession. This raises the whole question of agency and the Government's attitude towards it, a subject on which I obviously have a particular experience.
My second interest, no less important, is that I have the honour to be the Patron of the Association of Insurance Brokers, the largest body in terms of numbers in the United Kingdom. It has a proud tradition, and it gives leadership in the industry, in common with other representative bodies. It has itself a distinguished leadership in the person of its current President, Mr. Welch, following the tradition of all those who have preceded him, and well supported by his council, advisers and professional staff. The association is one of the constituent bodies of the council to which reference has already been made. It will be seen that I have a more than usual professional and academic interest in this matter.
The insurance industry is by far the largest single earner of invisables. Our country is the leading international insurance centre in the world. It is unique. The City is the only place in the world where one can make contact with every section of the insurance market—Lloyd's, the companies, the brokers and the overseas offices of foreign insurance companies. Our industry is an enormous earner of overseas currency, earned without the employment of any raw materials, save perhaps paper and ink.
The figures are outstanding. In 1974 the net earnings were £372 million. I say nothing of the tremendous cash flow behind that huge statistic. In 1975 the total was no less than £452 million, made up as follows: by the companies, £158 million; Lloyd's, £190 million; the brokers, £104 million. That makes a total of some 46 per cent. of all the net invisible earnings of the City of London of just under £1,000 million. I have no doubt that the figures for 1976 are higher still.
To put it in a nutshell, the British insurance industry in all its constituent parts is a priceless national asset. It is Parliament's duty to safeguard it, to enhance it, to assist it to develop, and certainly not to impede it or discredit it in any way by, for example, some of the 1884 absurd and ill-advised proposals for nationalisation of parts of the industry which have been advanced in some quarters.
It is a very diverse industry. In a way, that is what the Bill is all about. It includes the largest international companies, whose names are household words. Their work ranges from insuring huge projects such as the jumbo jets to, say, television sets with a premium of £1.50 a year.
The industry offers a huge choice to the insuring public. For example, there are more than 100 life assurance companies of size and stature operating in this country. The companies range from the smallest to the greatest.
Brokers bringing 75 per cent. of all overseas premium income earned into the United Kingdom market include a number of substantial household names. At the other extreme there are the tiny firms, the High Street firms, perhaps even the back-street firms, the sole traders and the like, perhaps producing a tiny volume of business in the year, with mortgage protection policies for the newly-married, fire insurance, accident insurance, motor car insurance and so on.
The point I want to stress about this diversity is as follows. Too often we make the mistake of believing that it is only the largest and the greatest, which are of importance and that it is only to the very biggest enterprises that we in this House should pay attention. But it is rightly said that small is beautiful. It is often the smallest companies that give the most helpful service to the men and women in our country.
Each sector inside the insurance world complements the others. I suggest that the broker in the High Street in Taunton or a small office behind the High Street is as much a part of the scene as the greatest firm of insurance brokers. So also is the local solicitor, as are the sales team working in my company and the agent.
It is right to suggest, as my hon. Friend the Member for St. Ives suggested, that the Bill cannot be considered in isolation from other proposals for legislation or regulation, past or future. Nor, as the hon. and learned Member for Hackney, North and Stoke Newington said, can the profession and activities of 1885 insurance brokers be debated without reference to the activities of intermediaries.
There is a very old adage, which I am sure you, Mr. Deputy Speaker, and the House know well, that insurance is never bought; it has to be sold. That is profoundly true. In the post-war years, and particularly in the last decade or 15 years, the insurance marketing industry has grown mightily. I do not know whether there are 9,000 or 5,000 brokers, and I do not know how many people are engaged as agents by the companies in the way that I have described in connection with my company to market insurance on their behalf. What is clear is that, however we describe people, the number engaged in marketing is very great.
It is equally clear that the rôle of the intermediaries is vital to the development of the insurance industry in the United Kingdom. It is curious that, on the whole, the growth of this marketing activity has been haphazard. Now, apart from what has been done in relation to company regulation, we are taking the first steps, through the enterprise of my hon. Friend the Member for Harrow, West, at regulation of one group of intermediaries, insurance brokers.
The Bill's proposals follow exactly the recommendations of the British Insurance Brokers Council, and it is right that we should pay tribute to all those who have been devotedly engaged, following the initiative of the Government—and I pay tribute to the Minister in that regard—in this work. I pay personal tribute to Mr. Francis Perkins for all he has done, not merely because it is attractive to see work done conscientiously and devotedly but because special gratification results when that work is good, sound and competent work. If one can add to that the enhancement of an important principle, the work becomes all the more valuable and meritorious.
I should like again to congratulate the Minister, for, as I understand Government policy, he has made the wise decision in principle that the regulation of insurance brokers is a matter not for the Government but for the industry itself. I make wholly common cause with my hon. Friends the Members for St. Ives 1886 and Harrow, West in the view that self-regulation is always vastly better than nanniness or fussiness on the part of the Government. I have no doubt that the Government and the Minister stand behind this Bill. So far so good.
People in the broking profession say "We shall not only indicate to the public that this is a respectable, honourable and competent profession which is operating in the public interest, but demonstrate to everybody that that is what we are doing." We can argue that perhaps for the CIB and certainly for the AIB. It may not be necessary to do that, but we shall do it.
One may take the view that standards of solvency, discipline and financial probity should be imposed on the broking industry; but, in fact, they exist already—for example, in the rules of the AIB. However, the question which arises—and this is where we stand in need of guidance from the Minister—is, what of the rest? If complaints have been made, they have not been about members of Lloyd's, of the CIB, of the AIB or of the other associations. They have been made at other levels and about other people. I do not say—it would be absurd to say—that there have never been complaints about insurance brokers, but, comparatively speaking, there have been almost none.
The second irony is that, in effect, we are discussing a measure which one might argue is not really necessary, because the associations, the federations and the corporations regulate their memberships.
The third irony is this. We are asking the Minister to say, and the hon. and learned Member for Hackney, North and Stoke Newington has particularly asked the Minister to say, what his intentions are about other parts of the marketing aspects of insurance work. It is almost as if we were assuming that it is essential that we should have regulation and legislation. I am not sure that that is necessarily so. If complaints arise outside the broking profession, that is not to say that all the people engaged in the marketing of insurance are necessarily bad. Of course they are not.
However, what in practice will be the situation if the House gives the Bill a Second Reading? There is some doubt about how many insurance brokers there are, but it is clear from everything that we have been told and have read that not 1887 everyone currently practising as an insurance broker will register. What will happen to the remainder, whatever the number may be? It is not good enough for the House to be given the general assurance that people can practise as investment counsellors.
My impression is that if the Bill is passed—I am not arguing that we should not pass it—and if in due course the law of agency is altered, as the Minister suggested, and I agree it should be altered, it is likely that anyone who does not fit neatly into defined categories, for example, as agents or insurance brokers, will be prohibited from selling insurance. That would be wrong and bad.
We need at some stage during the Bill's passage a clear indication from its sponsor or sponsors and, I hope, from the Government about how they envisage the development of the industry. Again there is an irony. There is a dilemma between the wish to make insurance freely available to people—many more people should be better insured than they are—and the need for control. There is a caveat emptor point which we all believe in, on the one hand, yet there is an obvious need for Parliament to exercise its authority and see that there is proper control and command.
We must ask the Minister to bear in mind that we want an answer today or at some time in the future about the way in which he sees the development of the position of agents, going beyond what is stated in the White Paper. I have said I agree that the law on agency needs reforming. Does the Minister envisage the Government introducing legislation to this end in the near future?
We hear a great deal about the need for disinterested advice. If one wishes to insure an aeroplane, a large factory or even an agricultural business, disinterested advice and competitive quotations in the market might be very desirable but I do not see that the advice necessarily has invariably to be disinterested to be useful. I take a different view.
We can discuss the details of the Bill, including matters concerning qualification and Clauses 1, 4 and 14, at leisure in Committee. I hope my hon. Friend will make it absolutely clear that he and his supporters will be wholly open- 1888 minded in relation to suggestions that we may seek to put at various times.
§ Mr. du Cann
I am very glad to have that assurance. I disagree very much with the statement which appeared recently in the Economist. It said:Any Bill which concentrates on brokers and leaves out the striking problem of agents would be a mistake.I do not believe that and I never have believed it. I do not believe that the excellent should exclude the good. We have had—the Minister has played a part in this—a continuous development of command of the insurance industry in this country based on the principle that it is the duty of the Government to project the public against the defrauder, the malefactor or those unqualified to look after the affairs of the public, but at the same time there is a belief that there should be maximum freedom for enterprise to operate. I accept and agree with that principle and I have professed it throughout all my professional life.
The Bill fits into that pattern exactly. It may not be altogether necessary. If there is a vote, however, I shall vote for its Second Reading, not only because I am a proud patron of one of the constituent associations responsible for its production. The House is entitled to ask, however, that both the sponsor and the Minister should give a further and fuller description of the Government's remaining strategy, and in the confident hope and expectation that this will emerge from the debate I pledge my support.
§ 12.54 p.m.
§ Mr. Roger Moate (Faversham)
I agree almost entirely with the sentiments expressed by my right hon. Friend the Member for Taunton (Mr. du Cann) whose speech was based on great knowledge of the insurance broking industry. It demonstrated his great anxiety that the public should continue to benefit from the way in which insurance is sold.
If I disagree with any of his speech at all it is in one respect only. He suggested that it was better to have a process of self-regulation than one imposed by the Government. I wonder whether that is correct. I wonder whether it is any better to have self-regulation, backed by statute, than to have the Government 1889 imposing control. I wonder whether we go too far in giving power to outside bodies, with considerable statutory backing, when these bodies are not directly answerable to this House.
If the Government impose regulations this House has greater powers to investigate and challenge by questioning or scrutiny, or through the work of the Ombudsman. The example of the Law Society has been quoted and I think that there is some comparability here. I would hesitate to say that it is better to have self-regulation than Government regulation, but perhaps we could consider that later in other contexts.
The most heartening words that I have heard this morning came from my hon. Friend the Member for St. Ives (Mr. Nott) when he said that had he been Secretary of State there would have been no White Paper. How I wish that he were, and that there were not! I do not think that we can consider the Bill without a brief reference to the White Paper. I do not criticise the Government for the timing of the White Paper because I think it is rather helpful to have it at this particular time. The problem is how we can have sensible consultation over a reasonable period on such a White Paper at the same time as allowing the Bill to make reasonable progress in Committee. As the hon. and learned Member for Hackney, North and Stoke Newington (Mr. Weitzman) pointed out, it is fundamentally important that we should have proper consultation.
There is a dispute about whether there are 9,000 brokers or whether there are other sorts of intermediaries. There are only some 3,000 broker members of the three or four associations affiliated to the British Insurance Brokers Council. I think that there are probably 9,000 people who now call themselves brokers, and there are probably tens of thousands who describe themseves as something else. But if there are 9,000 that means that 6,000 people have not yet had the opportunity to put forward their views on these proposals. These are the people who are most immediately and most directly affected by the proposals, and we must find some way of consulting them. I would hope that every one of them would write to my hon. Friend the Member for Harrow, West (Mr. Page) 1890 and express his views. We must have a process of consultation with them. That point was made well in the White Paper, as were a number of other important points.
It is important that the White Paper rejected completely the idea of State licensing. It said that the Government had neither the staff nor the expertise and did not wish to incur the expense of running a licensing system. How I wish that they always adopted such an anti-bureaucratic line in their approach to all legislation! A State licensing system of Intermediaries in this country would be totally impractical, and the Government and the industry both know that.
The Government then asked the industry to bring forward its own proposals for self-regulation. In my view these proposals are not in the public interest and not even in the interests of the industry. I would have preferred the industry to say that it did not consider the suggestion practicable, leaving it at that. But in the circumstance, having been asked to submit proposals, there are probably as reasonable as any, with certain major exceptions to which I shall come later.
The White Paper suggested further legislation on the subject of the laws of agency. I suspect that we are putting the cart before the horse. Until we can define and tighten up the laws of agency, it is not possible or practical to legislate about insurance brokers. There is not a clear or neat dividing line between brokers and agents. If a broker specialises in a particular line of insurance he might find that he is placing business with only one or two underwriters or offices. No one would suggest that he should not continue to do so. On the other hand, there is the person who does not describe himself as an insurance broker but who may have dozens of agencies with separate companies and who, therefore, has a wider range of companies at his disposal than the more specialist broker.
The only argument that can be put forward in favour of legislation is the one considered by the hon. and learned Member for Hackney, North and Stoke Newington, which is that of protecting the consumer. But the Bill does not do that. The consultative document goes out 1891 of its way to point out that it makes no difference to the consumer. On page 12, dealing with the proposals for self-regulation, it says:To avoid any possible misunderstanding the Council wish to make it clear that it is not seeking to put out of business those companies and individuals already providing an insurance service. All that is asked is that they should not be permitted to use the term 'insurance broker' as part of their respective descriptions.If it is suggested that there are people practising insurance today who are undesirable people, presumably the object of consumer protection legislation will be to prevent them practising. These proposals do not do that. They will still be able to practise as insurance agents, insurance managers, assurance brokers, insurance intermediaries or insurance consultants, so they will be able to carry on doing the same business as they do at present.
The White Paper was alarmed that the proposals for self-regulation might restrict competition and also might be ineffective. I suggest that this package will achieve both those objectives in a rather extraordinary manner, because they will be ineffective in terms of the public interest.
My hon. Friend the Member for Harrow, West said that he felt that the Bill was needed, but he did not quote examples of where the public interest had been disadvantaged by the absence of control. I expected him to produce cases to illustrate how individuals had suffered and would not have suffered had his Bill been enacted.
§ Mr. John Page
My hon. Friend does not know the enormous amount of pruning that I had to do to restrict my speech to 45 minutes, plus interruptions. I could have given examples, especially in the motor insurance business. I have had the instances of three constituents brought to me where the help given to the injured parties by their brokers was quite inadequate.
§ Mr. Moate
I was about to say that, of course, there are examples of bad insurance broking. But regulation itself will not prevent them. We know that the very tight regulation of solicitors does not prevent there being bad solicitors and does not prevent complaints to Members of Parliament about the legal profession. We have to establish that there is an 1892 abnormal amount of abuse which can be prevented by legislation. The cases which have given rise to what the Government describe as "unease"—
§ Mr. John Page
Does not my hon. Friend feel that the cases where there has been a failure by people purporting to be insurance agents over car insurance show the need for registration? In the instance of one of my constituents the broker was not able to deliver the cover which my constituent thought that he had. If the man had been a registered agent, he would have been compelled to have the indemnity policy. Through that indemnity policy, the public are protected. That is the part which I find most attractive.
§ Mr. Moate
That is diverging into another very important major area. As an insurance broker myself, I believe passionately in the need for the provision of proper professional indemnity insurance. But, of course, it may be that the insurance agent about whom my hon. Friend complains will continue to practise as an insurance agent, as he can under the Bill, so the public is in no way benefiting by the Bill. They would if the Government produced proposals to tighten up the law on agency, but that is a different though a very important subject.
I was about to say that there have been examples which have given rise to public concern. There was the Nation Life case. But many Nation Life policies were not sold by insurance brokers. A great many were sold by all sorts of other intermediaries, and they will continue to do that. But, now that we have the Policyholders Protection Act, there is undoubtedly an additional protection there to cover the public, but I will not go into that now.
I do not think that this Bill would solve a Nation Life situation. The one which started this hare was the Andrews and Booth story. They were subsidiaries of Vehicle & General. It was argued that they were not truly independent brokers. They probably had a number of other agencies and would have been entitled to register as insurance brokers under this Bill. But we now have rules on disclosure which mean that brokers must declare when they are subsidiaries 1893 of an insurance company, so that point is already covered.
Another area of concern is that of mortgage broking. There have been dubious practices by a number of mortgage brokers. This Bill does not cover mortgage brokers, but we have been told that they will be controlled by consumer credit legislation.
§ Mr. McCrindle
When my hon. Friend says that mortgage brokers are not controlled, is it not wise to remember that they are very much affected by the Consumer Credit Act and that, as we know, many of them also belong to some of the associations to which the British Insurance Brokers Council belongs? In effect, there would be some coverage for them in this Bill.
§ Mr. Moate
That may be so. If they are exclusively mortgage brokers, there are other ways of controlling the undesirable activities in which a minority of them might engage. I do not think that the public interest is protected by this Bill.
My last example is that of the high-pressure life salesman. I do not wish to cast a slur on life salesmen generally, because I think that the British public have benefited immensely from the selling techniques of British insurance. But there is no doubt that a tiny minority have incurred some odium. Often, however, they do not call themselves insurance brokers, anyway. A householder getting a card through his door from someone trying to sell life insurance will discover that just as often he calls himself a life consultant, a life insurance underwriter, or any one of a number of other descriptions. The term "broker" is not employed by him as a means to sell insurance or to persuade the public that he is of a higher professional standing than someone else. So again this Bill does not really help to protect the public.
I do not believe that the case for the Bill has been proven. But, even if there were evidence of the need to tighten up the law in this respect, I should prefer to go along with the Government and suggest that we should tighten up the law of agency rather than trying to restrict the use of the term "insurance broker". That is really what we are doing.
1894 I do not see why the term "insurance broker" should not be allowed to be used by thousands of individuals who have considerable experience in insurance but who might not qualify under the fairly strict controls laid down by the British Insurance Brokers Council. My original anxiety about the consultative document was that it stipulated that one had to be a director or principal of a company. I was glad that the representations made to my hon. Friend the Member for Harrow, West resulted in an improvement in the Bill. Now it says that one need only have practical experience in insurance broking. But the Bill still requires that a person should have been in the insurance broking world, and not employed by an insurance company. I am glad that my hon. Friend has made fairly helpful noises about the effect of excluding from the right to apply for qualification the thousands upon thousands of highly-skilled people who have had all their experience in the insurance company world.
I believe that it is offensive when a man who has been a branch manager of an insurance company, a life inspector—perhaps a highly-skilled one—or even a general manager or deputy general manager of an insurance company is disqualified from being an insurance broker, even though he might have qualifications, experience and knowledge of the market, certainly as much as any person who has spent three years working in a junior capacity in an insurance broker's office.
The hon. Member for Battersea, South (Mr. Perry) is experienced in the insurance world. It would be offensive to suggest that he should not be able to go out tomorrow and establish himself as an insurance broker. I would expect, assuming he met other qualifications, that he could do the job a great deal better than many. I hope that we can have a general agreement that in Committee we must widen the area of those who can qualify to be brokers and concentrate more, if we have to have such regulation, on the continuing controls over the way in which they practise. I am thinking of the requirements for professional indemnity insurance, which I endorse entirely, scrutiny of accounts, and so on.
But let us make sure, as I hope my hon. Friend will, that we are not creating a closed shop for the insurance broking 1895 profession. I know that my hon. Friend the Member for Harrow, West will be the last person to want to do such a thing. Even if he thinks that by this Bill he is not, he should bear in mind that we are just paving the way for the further legislation which has been hinted at by the Government, and I cannot believe that that would be in the interests of anybody.
The way in which insurance has been sold in this country has been a major reason for the strength of British insurance. It is the major reason why the British public is probably better protected in life insurance, motor insurance, and householders' insurance than other people anywhere else in the world. If it were not for the variety of ways in which insurance has been sold we should not have the strength of British insurance as we have it today. If we try to regulate it, as my hon. Friend and the Government are sadly trying to do, there is a danger of destroying the freedom and enterprise upon which, above almost all other things, British insurance has been founded.
There are many points I should like to take up, but many of them are matters for Committee. It alarms me that we have a Bill such as this which by its technicalities provides no fewer than nine occasions on which to bring forth Statutory Instruments. Those are nine occasions on which the House will have little influence on or say in what the legislation will be. In practice that means that the council will draw up regulations, agree them with the Secretary of State and that they will be passed without this House debating them. That is a disquieting feature when found in a Private Member's Bill.
My hon. Friend has a mammoth task with 29 clauses and one schedule to his Bill. It will be a lengthy Committee stage, but I would prefer to see a bigger Bill with more details spelt out. The conditions we impose by statutory regulations could be very serious for the small man by preventing him from starting up in business.
If we were honest, we would have to admit that under these proposals thousands and thousands of established insurance brokers—some of them perhaps sitting on the councils of the worthy broking associations—would have been 1896 unable to set up in business in the first place. I could give many examples of people who are now respected and established insurance brokers who would have been unable to set up under these regulations. I know that that is not my hon. Friend's intention, but I ask only that as we proceed we try to ensure that there is—if I may borrow a Common Market phrase—"freedom of establishment" for the individuals who have something to offer to the British public and British insurance.
Perhaps we should look at how these people are controlled once they are established as brokers or agents. On that point I agree with my right hon. Friend the Member for Taunton. It is necessary to tighten up the laws of agency. If it is a fact, as my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) said, that these rules have been applied too slackly, there is more scope for protecting the public in that direction than in trying to apply regulations as set out in the Bill to situations which cannot properly be defined in law.
My hon. Friend the Member for Daventry (Mr. Jones) referred to Clause 4 when he asked why a subsidiary or branch of a larger organisation could make do with having only a registered insurance broker as a manager and whether this was not in conflict with the terms of the Bill. What puzzles me is that the clause insists that where a corporate body is applying for registration as a broker, a majority of its directors must be registered insurance brokers to enable it to qualify. The situation then arises that if a company wishes to apply to be registered, it must fulfil this requirement, but if Thomas Cook wishes to open an insurance division which calls itself an insurance broker, it needs only one registered insurance broker as its manager. It would be onerous to require that a person newly-established in business must have all his directors as registered insurance brokers. This is one of a large number of details which we can look at in Committee, and I hope that we can scrutinise this whole question of the rules for admission, as distinct from the rules of control, very carefully. We must be careful not to price the small man out of existence. Some of the suggestions are just a little onerous.
1897 I congratulate my hon. Friend the Member for Harrow, West on the way in which he has presented his Bill, on his mastery of the subject in an amazingly short time and on the helpful way in which he has received suggestions. It must be right to allow the Bill a Second Reading, but we must examine the matter in detail and depth in the coming months before we finally decide whether it should pass from this House to another place.
§ 1.18 p.m.
§ Mr. Ernest G. Perry (Battersea, South)
My first duty is to apologise to the right hon. Member for Taunton (Mr. du Cann) for being unable to stay for his speech. I had certain important business at 12.30 which prevented my presence in the Chamber. I know that he occupies a very important position in the insurance broking world as president of one of the main bodies connected with the industry.
I wish to congratulate the hon. Member for Harrow, West (Mr. Page) on having the fortitude and courage to present a Bill of this nature, especially since he has never been in the industry. For him to present a Bill with 29 clauses and one schedule dealing with the largest industry in the country is for him to carry out a task that would frighten off most of us, even though we had perhaps been engaged in the business for many years. He has taken on a superhuman task and I only hope that he is able to stand up to it in Committee, because what we have seen today is merely child's play by comparison.
I was in the insurance industry for almost all my working life before coming to this House. To me the industry epitomises the strength of British commercial life. For more than 200 years the industry has provided the money, the seed corn, to keep the process of industry going. Today it ranks as the largest single earner of foreign currency in the country. Anything we do when we discuss the Bill must be done with that in mind.
I remember similar Bills to this, dealing with service industries, that fell by the wayside. I remember that famous Bill in 1965 called the Estate Agents Bill. It was introduced by the hon. Member for Daventry (Mr. Jones). We went through 1898 the Bill and corrected its faults and overcame its obstacles. I thought that it was a most useful Bill, but it fell when a General Election was called. That Bill dealt with a service industry and so does this. It deals with the largest service industry in the country and up to now it has had an impeccable record for its treatment of policyholders and their investments. Of course, there have been slips and faults and trouble, but in the main the industry has employed people who have dedicated their lives to insurance. That is why I take up the comment by the hon. Member for Faversham (Mr. Moate) who referred to people in the industry who, he believed, should not be allowed to register as brokers under these regulations. That point must be carefully considered in Committee.
The ramifications of the industry are so enormous that the mind boggles. Enormous sums of money are mentioned, such as £6,000 million, when assets and payments on claims are referred to. It has taken two centuries to build up the industry, and we set our standards by that famous conglomeration known as Lloyd's underwriters. We want to model the insurance industry upon that organisation.
There are many different types of employment within the industry. There are brokers, agents, insurance contractors and, as mentioned by the hon. Member for Faversham, people known as consultants, and so on. All these are usually engaged in selling insurance. The associations that represent the brokers are to be congratulated on trying to introduce voluntary regulations. I do not doubt that they have been concerned by the various incidents and bankruptcies that have occurred over the last few years. The organisations want to ensure that such things cannot happen again and that the brokerage business is put on a regular and profitable basis.
A broker stands between the company selling insurance and the client who wants to buy insurance. He is the intermediary who tries to give satisfactory service to both sides. He is a link between companies and clients. There are over 60,000 insurance agents who work for companies as their employees, seeking clients for those companies.
§ Mr. Tim Renton
I was interested to hear the hon. Member quote the figure 1899 of 60,000 agents. I had not heard that figure before. Could the hon. Member tell us where it came from and if he is satisfied that it is right?
§ Mr. Perry
I was referring to full-time agents connected with the main insurance companies belonging to the BIA, that is, agents selling insurance. The insurance industry employs a total staff of over 250,000 people and has an enormous number of agents selling insurance. That figure may be a few thousand out, but at present the number of people selling insurance is not declining and is relatively steady. Such people should be congratulated on what they have done to build up the industry.
There are others working in the insurance industry who are known as insurance contractors. This term applies to those who have what is called a "book interest". In order to understand this one must comprehend the ramifications of the industry. There are one or two major societies—one of which employs between 7,000 and 10,000 people—whose agents, because of a court decision, are termed insurance contractors. They are called that because they have "book interest" in the same way that a broker has a capital value accrued in his business. An insurance contractor working for an insurance society has a "book interest" in the book that he has built up and his book has a capital value for him. This does not apply to agents who are paid salaries and commissions by their employer companies. Such agents have no "book interest".
Another type of broker in the industry acts as a full-time agent working from home for several companies. So there are various types working in the industry and known by different names. Additionally, there are doctors, accountants and legal advisers connected with the insurance industry who have some knowledge of insurance but their knowledge is strictly limited. I am dubious about such people being allowed to register as insurance brokers because most of their time is not spent working in insurance.
The right to be registered as a broker should be given only to those whose main occupation is in the insurance industry. People outside the insurance industry should not have the benefit of the privilege and respect that would come from 1900 registration with the council proposed in the Bill.
§ Mr. Arthur Jones
In that case, would not, for example, the firm of Thomas Cook, which does a lot of travel insurance for its customers, find it difficult to qualify as insurance brokers, even if a registered insurance broker were employed on its staff to handle the insurance business? It could not be said that insurance brokerage was that firm's main business.
§ Mr. Perry
That is an interesting point. Thomas Cook now carries out not only travel business but banking and a number of other types of business. I do not doubt that that company has a large insurance department to handle all the different insurance policies issued by its various branches. I think that Thomas Cook probably would be considered an insurance broker in the terms that I suggest.
In referring to those who should be excluded from registration, I mean, for example, those who run their own travel agencies and who sell possibly 50 insurance policies a year. Such a person should not be registered as a broker. There are too many spare-timers in the insurance industry. It is usually such people who give the insurance industry a bad name, because they sell policies without explaining them properly to clients. The voluntary registration of insurance brokers would therefore be a good thing.
§ Mr. Tim Renton
I apologise for interrupting for a second time, but I have lost the thread of the argument. Why should it be claimed that people who advise on insurance in their spare time give the industry a bad name? A solicitor who gives advice to a trust or who gives advice on a life policy may be more ready to give impartial and experienced advice than someone who spends all his time selling insurance, because a solicitor does not depend on that income for his life blood. The professions, such as accountants, solicitors and stockbrokers, that sell insurance periodically, should not be given a bad name simply because they do not sell insurance full time.
§ Mr. Perry
I do not wish to give a bad name to those mentioned by the hon. Gentleman. I am referring to the fact 1901 that advertisements are published in various journals offering people spare-time occupations at night. People are asked to go from door to door canvassing the sale of policies for deferred house purchase and that type of thing, allied with insurance. In the wake of the man who knocks on the door and offers such a policy to a member of the public an expert is sent along and, before the customer knows where he is, he is agreeing to take on a policy for deferred house purchase that is not worth the paper it is written on.
We wish to guard against that practice in the insurance broking industry. Certainly the industry wants to rid itself of any tarnish that may have been attached to its name in the last few years. The objective is to try to regularise the activities of those who are engaged in the insurance industry. That is why I support the Bill.
I do not go the whole way with the Bill. The Bill contains 29 clauses and it was published only towards the end of last week. That did not give very much time to lay people to examine, question and analyse its contents. These matters will have to be analysed more thoroughly in Committee. We have received a number of briefs from the many organisations that are interested in the Bill. I want to see the Bill go through, although it may have to be amended. We want to see voluntary rather than compulsory regulation by the Department.
§ Mr. Moate
The hon. Gentleman said that he supported the Bill because it would regulate the activities of those who are employed in the industry. But the Bill in reality does not have that effect. It seeks merely to deal with a small group of people in the industry who call themselves insurance brokers. Therefore, the individuals who deal in deferred house purchase arrangements in the evenings from door to door will still be able to continue to do so, provided that they do not call themselves insurance brokers. Indeed, many of them do not at present call themselves by that name.
§ Mr. Perry
In many cases firms of brokers which are perhaps not registered with the broking societies have indulged in these practices. Therefore, the Bill must be amended to cover that facet of 1902 the problem. I am sure that the broking organisations would wish to see the situation covered.
I am concerned that we should not reduce the status which the insurance industry has come to enjoy. Therefore, anything we can do on a voluntary basis to ensure that the industry is run on satisfactory lines the better. The insurance industry has greater earnings abroad than any other industry. It is doing a tremendous job and we must do all we can to help it to regularise its activities and to keep it on a sound financial basis.
I congratulate the hon. Member for Harrow, West on the task he has undertaken. I know that he will have the assistance of some of his hon. Friends, and no doubt they will be helping him through the Committee stage. I hope to take part in the Committee and hope to be able to contribute when that time comes. I, too, hope to help the hon. Gentleman as much as possible. I hope that the Bill will be given a Second Reading.
§ 1.35 p.m.
§ Mr. Fergus Montgomery (Altrincham and Sale)
I promise the House that I shall be brief.
I agreed with many of the comments made by the hon. Member for Battersea, South (Mr. Perry). I also wish to congratulate my hon. Friend the Member for Harrow, West (Mr. Page) on his being the first to be drawn in the Ballot. I remember the General Election of 1959 when I was extremely fortunate to gain the Newcastle upon Tyne, East seat by a mere 98 votes.
At that time my hon. Friend failed to gain the seat at Eton and Slough by fewer than 100 votes. However, in 1960 he was selected for Harrow, West, was elected, and has been in the House ever since. He has now completed over 16 years' service in the House. My parliamentary career has not had the same smooth course because, in theatrical terms, I have had a resting period. Nevertheless, I have now completed 14 years' service in this House, but when I have completed 16 years' service I shall then qualify to see my hon. Friend in order to inquire how one goes about coming first in the Private Members' Ballot.
Much of the Bill is technical and a great deal of work will need to be carried 1903 out in Committee. I wish to deal with the reasons that lie behind the Bill. I can do no better than quote a consultative document issued by the British Insurance Brokers Council in August 1976, which set out some of the reasons for believing that action needs to be taken. That document points to the ease with which it is possible to commence business and to adopt a style of description which implies to the general public possession of special skills or an ability in the market.
Secondly, it draws attention to firms that convey the impression of offering exceptional skills, such as investment advice. Thirdly, it points to the inability to recognise the quality of insurance advice; fourthly, to the impartiality of the advice being influenced by the amount of commission received by the insurance broker; fifthly, to an error, omission or negligent act on the part of the broker —the failure, for example, having been so instructed, to renew the policy on a a house and its contents, which are then destroyed by fire. Sixthly, the consultative document mentions financial failure or fraudulent disposal of insurance moneys. It goes on:Intermediaries handling substantial amounts of money and insolvency can, in certain cases, lead to a financial loss to a member of the public. Likewise, an intermediary could fraudulently dispose of the insurance monies in his hands which could lead to a similar financial loss.The seventh cause for public apprehension is given by the council as:bad advice when, for example, an insured using an insurance broker enters into an insurance contract which does not properly suit his needs or whereby the insured fails to secure from the insurer a fair settlement of a claim which would otherwise have been recoverable".The last matter to which the council draws attention is:unacceptable methods of selling life assurance by 'high-pressure' salesmen making extravagant promises of performance or the offer of future financial assistance, for example, mortgages.Many of these matters are the cause for anxiety among reputable insurance brokers. They want to preserve their good name and reputation, but they are concerned at the ease with which some people can put up signs and advertise themselves as insurance brokers, with no qualifications, and no right to call themselves by that name.
1904 It is now possible for somebody with no insurance or educational qualifications, or even with insufficient financial backing, to pose as an insurance broker. I believe that the Bill will ensure that only those with the necessary experience, technical qualifications and financial backing will be registered, so that in that way the Bill will provide protection for the general public.
My right hon. Friend the Member for Taunton (Mr. du Cann) spoke of the successes of the insurance business. We must remember that it is a most important export industry which earns a figure of £452 million in terms of our balance of payments. The failure of an insurance broker and the attendant publicity has a detrimental effect on overseas confidence, in insurance broking.
I think we all realise that insurance is a highly competitive business. We have competitors from other nations. Any incident that puts the British insurance industry in disrepute could have a bad effect on the whole industry. Last year—I suppose this is the reason that I am intervening in the debate—I was asked by insurance brokers in my area to talk to them and to listen to their points of view. Their overriding concern was that unsuitable people were being allowed to call themselves insurance brokers. During the course of the meeting I also detected the underlying fear that if we had legislation it could present difficulties to the small insurance trader. That is one of the points that has been made by those who have already spoken.
I can understand those fears. I am saddened by the number of small businesses of every description that have been forced out of business in the past two years. It is a bad thing to have small businesses disappear because I do not believe that large businesses are necessarily always best. However, I think that my hon. Friend the Member for Harrow, West deserves praise for the Bill. He has taken care to ensure that the small trader will be fairly treated. I speak as a layman, not having the technical knowledge of some of my hon. Friends, but I believe that the requirements that are being asked for in the Bill should easily be met by genuine brokers.
I think I am right in saying that it is being asked that brokers should have a 1905 minimum capital of £1,000 and either five years' experience in an insurance broker's office or three years' experience plus an academic qualification.
§ Mr. Montgomery
Yes. Another requirement is that there should be an errors and omissions policy to cover any losses incurred by the dishonesty of employees or principals. One of the matters that perhaps caused concern among small brokers was the cost of registration. If the figures that I have been given are correct, it should amount to about £325 per annum for the smallest firm. Perhaps at the end of the war £325 per annum would have sounded a great deal of money. When I began teaching in 1950 I received the magnificent sum of £300 a year. I had great difficulty in living even then. I now earn more than £300 but I still find great difficulty in making ends meet.
It may be said that £325 per annum is the equivalent of 40 cigarettes a day. Maybe that is not a good analogy but it demonstrates that it is quite a small price to pay to try to ensure that we are properly protected and that we are raising the standards of the profession.
I welcome the Bill. I congratulate my hon. Friend again on introducing it. I support it in principle not only because it provides a safeguard for the general public, which is very important, but because it is for the good of the genuine insurance broker.
§ 1.45 p.m.
§ The Under-Secretary of State for Trade (Mr. Clinton Davis)
Like many hon. Members, I start by congratulating the hon. Member for Harrow, West (Mr. Page) on his excellent fortune in coming top of the Ballot for Private Members' Bills this Session. I hope that he enjoys as much success in bingo halls and other forms of gambling. Secondly, I congratulate him on his excellent judgment in choosing this topic as the subject matter of his attentions. It is an admirable and constructive Bill.
We have had a revealing insight into the hon. Gentleman's character. We are told that he is a great caveat emptor man and a great caveat conductor man, what- 1906 ever that may mean. I am not sure whether that puts him into the class of André Previn or whether it is intended to do so. We are told that he is not a nanny or auntie figure. However, he has revealed a comfortable and comforting quality in the way in which he has approached this subject, and I am delighted that he has done so.
Perhaps I, too, should declare an interest. I suspect that at some stage the firm of solicitors for which I am now a consultant and an erstwhile full partner must have engaged in advising people about insurance. I declare that interest although I do not think it is relevant to my consideration of this matter.
The hon. Gentleman's approach to this issue is wholly consistent in principle with the attitude of myself and the hon. Member for Brentwood and Ongar (Mr. McCrindle), who has temporarily left the Chamber. Some years ago we were both engaged in seeking through an organisation that rejoiced in the name of SCREAM—the Society for the Compulsory Registration of Estate Agents and Mortgage Brokers—to persuade the Government of the day that there was a strong case for such registration. Unfortunately, even up to the present time those views do not seem to have been able to command parliamentary attention.
This is a Bill that the Government welcome, and we intend to support it. Mention has been made of competing forces and whether we should have self-regulation or compulsory regulation. As is fairly clear, we have come down in favour of self-regulation, although that depends on the terms that are ultimately worked out. I am reminded of the situation in one of the States of the United States where regulation is practised. An agent had an uncomfortable experience because he was called before the Insurance Commissioner. The Commissioner said to him "Don't you know that you cannot sell insurance without a State licence?" The agent replied "You sure said a mouthful. I knew I couldn't sell insurance, but I didn't know the reason." I do not know how relevant that may be to the subject.
I am delighted that the Bill's backers have come from both sides of the House. That is always a useful way of proceeding with Bills of this character. One 1907 matter that should be made clear to those who have not been entirely convinced about the need for some action on this front is that the initiative for the Bill came entirely from the hon. Member for Harrow, West and not from us. Inspirational though the influence of present Ministers at the Department of Trade may be, we did not ask for the Bill. We did not suggest it and we did not draft it. The ideas that it embodies are not our ideas but those of the hon. Gentleman and eminent representatives of the British Insurance Brokers Association, who, I gather, have been advising him.
We have approached the Bill with an open mind. Although we do not claim any credit for it, we readily acknowledge its merits. We are prepared to commend it to the House, although that is not to say that there will not be some difficult issues to be faced in Committee. I shall explain why we have come to this conclusion and shall outline the Government's general attitude. I have been invited to comment upon this whole area of insurance and our approach to it. The Bill fits in very much with our concern to give greater protection to the policyholder, both actual and prospective.
The hon. Member for St. Ives (Mr. Nott), who has explained why he is not able to be here—and we accept that explanation wholly—was unspecifically critical of regulation, and I think that if he had had a little more time we might have cross-examined him about that, just as his hon. Friend was cross-examined a little earlier, because I was not sure where he stood in relation to the form of regulation that has been introduced over the past few years. I was under the impression that it had engaged the support of hon. Members on both sides of the House with, to some extent, the exception of the Policyholders Protection Bill, which seemed at one stage to have few friends but which, I suspect, has many now that it has been enacted. The hon. Member for Faversham (Mr. Moate), who is absent—temporarily, I assume; perhaps wisely—commented on much the same lines that over-regulation, as it is put, could be injurious to the freedom and enterprise of the insurance industry.
1908 I take the point made by the hon. Member for Altrincham and Sale (Mr. Montgomery) that the reputation of the British insurance industry as a whole is something to be cossetted and nourished, and that when there are failures— and the scale of failure is relevant—they can have an effect upon the national and international reputation of the industry. But there can also be a damaging effect locally where there is a failure perhaps of an insurance broker. Therefore, it is important to give a boost to the reputation of the industry, and this has been part of the philosophy of the Government over the past three years or so.
During that period we have been using our powers under the insurance companies legislation progressively to tighten up our supervision of companies and raise the standards of selling. We have made regulations for the valuation and admissibility of insurance companies' assets. We have made regulations for improving our vetting of new controllers, directors and managers of insurance companies, for restricting the types of assets to which benefits under life policies may be linked, and for obliging insurance intermediaries when selling the policies of a particular insurance company to declare their connections with that company—connections, that is, such as common ownership or a sole agency agreement.
In addition, we are taking steps with regard to advertising. I think it is right that we should do that, because some advertisements can be terribly flamboyant in their claims. I am reminded of one which appeared in a newspaper not very long ago, which read:Come shortage, slump, credit squeeze, trade deficit, earthquake, act of God, petrol shortage, we guarantee 48 per cent. growth in four years.Even more important, we have established a completely new scheme under the Policyholders Protection Act for safeguarding the policyholders of failed companies from serious loss. As I indicated, I do not see very much evidence of the opposition that we received during the passage of that Bill now that the Act is on the statute book, and I believe that many policyholders, thousands in all, have every reason to support what has happened. I think it is right to say that our first reason for supporting today's 1909 Bill is that it is another step towards our goal of setting up comprehensive protection for the consumer, and in particular the insurance consumer.
I come now to the point about the need for another look, perhaps caveat emptor in this regard, at the point made by the hon. Member for Harrow, West, who introduced the Bill so forcefully, because consumer protection is particularly important in insurance. For the man in the street, insurance is a particularly complex and rather unglamorous commodity, but it is very necessary to him. It is important, therefore, that he should be persuaded to buy it, but not by underhand means, and that what he is persuaded to buy is what he really needs.
That, as the consultative document says, faces the Government with a real dilemma. On the one hand, it is obviously desirable that a salesman should know what he is selling. Because insurance is so complicated, and because large sums of money are often at stake and the penalty for not having any, or any proper, insurance can be catastrophic for the individual, it is important that the insurance salesman in particular should have a certain minimum of training and experience as well as, most importantly, having integrity.
On the other hand, because insurance is essential to the citizen of today to enable him to protect himself and his family from the risks of everyday life—this is where the dilemma arises—it is also important not unduly to limit the number of insurance sales outlets. We have to be very cautious about the controls that we introduce, otherwise the ordinary citizen may have no one to urge him to buy the insurance cover that he needs, and this would be a serious state of affairs.
That brings me specifically to the Government's policy towards insurance intermediaries. It is an area in which there have been striking, important developments over the past couple of years—developments for which, I claim, much credit is due to the Government as well as to the brokers themselves. It was my right hon. Friend who is now Secretary of State for the Environment who, in 1975, took the initiative in asking the 1910 four brokers' organisations to look at the problem of setting up standards for insurance broking, and he and I have to some extent been rebuked by the hon. Members for St. Ives and Faversham for doing that. I take issue with those two hon. Gentlemen on that. I believe that there was an overwhelming need and demand for that initiative to be taken. It is folly to believe that the problems that worry ordinary people in this field will somehow disappear of their own volition. That will not happen.
I am glad that that initiative was taken by those four brokers' organisations. They joined together in the British Insurance Brokers Council—now the Association—a step which we warmly welcomed, and the same initiative on the part of the Government led to the drawing up of the BIBC's proposals last year. That has now produced two additional developments—the Government's consultative paper on insurance intermediaries and the hon. Gentleman's Bill.
It is right, because again I have been challenged on this point, that I should set the Bill in the context of our policy on insurance intermediaries as set out in the consultative paper that we issued last week. Because of the danger of causing a drastic curtailment of insurance sales outlets, we favour—I say this advisedly—a cautious, step-by-step approach.
The first step must be to create a clear distinction between the two kinds of people who sell insurance, apart from the insurance companies themselves. On the one hand there are those engaged by a particular company to sell that company's policy—by that I am referring to the insurance agent—and on the other hand there are those who aim to meet the public need for impartial but expert help in choosing what they need from all the different policies that are on offer. In this regard I am referring to the insurance broker.
In order to bring out this distinction, the insurance broker must be established in the public mind as someone in whose expertise and integrity people may repose full confidence. I believe that that has motivated the hon. Member for Harrow, West as well. That is why, in 1975, the present Secretary of State for the Environment asked the brokers' organisations to examine the problems and to consider what standards for insurance broking 1911 should be drawn up and how they might be administered. The resultant proposals are annexed to the Government's consultative document.
We were sufficiently impressed by those proposals to accept them in principle as a framework for self-regulation. In paragraph 11 of our document we say:The Government thinks that these proposals can provide the basis for a practicable and effective scheme of self-regulation, but the details need further debate and elaboration, and it is hoped that publication of the document "—that is, the brokers' consultative document—will stimulate this. The Government accordingly invites comment on the document's proposals".We go on to say:Full account will be taken of the comments received before the Government endorsed any particular scheme.From that, I come immediately to one of the points in a characteristically impressive speech by my hon. and learned Friend the Member for Hackney, North and Stoke Newington (Mr. Weitzman). I have to take seriously whatever he says, but particularly on this occasion. My hon. and learned Friend was, in effect, saying that it is strange that the Government should produce their consultative document only a few days before this debate, thus allowing little time for consultation between the two.
That is true, but I did not imagine that we should have been able to hold our consultations in three days and then be able to tell the House that we were totally satisfied. The consultation period will go on, and I believe that as a result we shall be able to incorporate in the Bill some of the constructive ideas which will no doubt emerge. I know that the hon. Member for Harrow, West will be pleased that we are to have the opportunity for this profound consultation. He has assured me that his mind is open and his approach flexible towards any amendments.
It has been suggested that we might consult only certain organisations. That is not so. We are ready to listen to the views of anyone with something constructive to offer. If that unleashes a torrent of correspondence on hon. Members I apologise, but that should be said. It is no good confining consultations to a few 1912 selected organisations, no matter how reputable and important they are.
The Bill meets the conditions that I have described for Government support We have asked for comments before the end of March, which should allow us to draft amendments, but it would be wrong to recommend legislation on the ground that, however wrong it might be now, it could be made acceptable later. The Bill already contains provisions which safeguard the ability of the Government and of the House, even after it is enacted, to take into account the views of the public.
Most of the detailed arrangements for regulating brokers are not spelt out in the Bill but have been wisely left for the making of rules by the proposed registration council.
§ Mr. Michael Ward (Peterborough)
My hon. Friend will agree, I think, that it will be difficult for most consumers to understand how a broker who is receiving payment from an insurance company can be as impartial and objective as my hon. Friend has described. How does he envisage any safeguards being introduced for the consumer? He will be aware that this is a matter with which I do not deal in a Bill which is due for discussion later today.
§ Mr. Davis
My hon. Friend has put his finger on an important and difficult question which will fall to be dealt with under the code of conduct. I hope that a satisfactory response will emerge. However, one of the important safeguards for the consumer is that, although the council which is to be established will have a majority of recognised brokers upon it, nevertheless the Secretary of State will be able to suggest four appointees, one of whom will be an accountant, and the President of the Law Society will be able to nominate another. Therefore, to that extent, some of the anxieties that brokers will somehow manage to get their own way and drive the thing through, so that any achievements are solely in their interests, will not be justified. However, what my hon. Friend has said will have to be carefully considered.
The making of the rules will be subject to the Secretary of State's approval. My right hon. Friend will have full regard to the comments that we receive during consultation before he gives his approval under Clause 27; my right hon. Friend 1913 may in some cases amend the council's rules on his own initiative, subject to the approval of Parliament. That is another important safeguard. Finally, Clause 29 provides for a substantial measure of flexibility because it enables the Secretary of State to decide when to bring the provisions into force. He can therefore satisfy himself that the public's comments on these proposals are properly and fully taken into account before the legislation takes effect.
There are several important matters on which the Government will want to satisfy themselves in considering the detailed implementation of the scheme if Parliament passes the Bill. The proposed code of conduct under Clause 9 will be of central importance, as the hon. Member for Harrow, West recognised. We shall want to ensure that it provides adequately for the independence of the broker from the insurer—a point made by my hon. Friend the Member for Peterborough (Mr. Ward).
Under Clause 10, we shall want to satisfy ourselves that adequate arrangements are made for monitoring the solvency of registered brokers and that proper consideration is given to the segregation of insurance money from other funds, in the interests of policyholders. I am not suggesting that we shall wantonly obstruct or delay the entry into force of the legislation, but there is a balance to be struck.
I am sure that the House will wish me to carry through the consultation process with sincerity and to give effect to any sensible and constructive suggestions that are made. Subject to that, I give the assurance that if the Bill is passed we shall do our best to bring it into full effect as rapidly as possible.
Some hon. Members may dispute the need for regulation on the ground that there is nothing wrong with insurance broking. The hon. Member for Faversham rather suggested that. He also suggested that the remedy was worse than the disease. I do not accept either of those comments. Ordinary people who buy insurance through an intermediary often do not know where they stand. Anyone can open an office and call himself an insurance broker, adviser or consultant. The man who calls himself an 1914 insurance broker may know very little about insurance. He may have had no business experience. He may have no financial backing and no proper accounting procedures for handling clients' money. He may be intent on earning a quick commission by pushing the policies of a particular insurance company without proper regard to his clients' needs.
The man in the street with an insurance problem has no way of distinguishing the man who calls himself a broker from the experienced, sound and independent broker upon whom he seeks to be reliant. It is high time that the public had a relatively easy means of distinguishing experienced, sound and independent insurance brokers, from those who are not. That at least will be possible under the Bill's proposals.
If a policyholder has cause for complaint against a broker who happens not to be a member of one of the established brokers' organisations, he has no recourse for redress unless he goes to the courts. That may entail considerable delay and expense. If, as the Bill envisages, there is a body with which all insurance brokers must be registered and a procedure for dealing with complaints, it becomes much easier for the policyholder with a legitimate complaint to have it satisfactorily resolved. That is a substantial reason for proceeding along the lines set out in the Bill.
Again, those who handle other people's money on trust should be under some form of supervision. The hon. Member for Brentwood and Ongar said that that principle was already recognised in the Consumer Credit Act 1974 in respect of credit intermediaries. That principle has been accepted for over a century in respect of insurance companies. There can, therefore, be no reason why the same principle should be denied in the case of brokers who receive insurance premiums from policyholders and who often handle money due to policyholders by way of claims and benefits.
The policyholder has a right to expect certain standards of integrity and sound management from all who handle his money. He is entitled to be protected from the results of incompetence, fraud and insolvency. He already has considerable protection in respect of insurance companies, so why not in respect of intermediaries? A variety of procedures and 1915 disciplines is set out in the Bill which will help that goal to be achieved. The Bill makes a start. It allows the man in the street to expect certain standards and protection in the case of one class of insurance intermediary, the registered insurance broker.
Some hon. Members have questioned whether self-regulation is enough. It has been argued that the Government should introduce a licensing scheme. There are arguments in favour of that course. That is recognised in paragraph 9 of the consultative paper. On the other hand, as is stated there, the Government do not have the detailed expertise necessary to carry out that function. It would mean an increase in public expenditure and manpower at a time when the Government are under tight constraints.
Contrary to the views of some of the more antediluvian Conservative Members, we have no doctrinaire desire to introduce direct controls everywhere. It is wrong to think that the Government are so hidebound by politicial dogma that they cannot consider cases on their merits. Our only concern is to ensure that the ordinary citizen is protected from incompetence and fraud when he wants advice on buying insurance.
The brokers have shown themselves ready to regulate themselves to provide that protection, and I congratulate them. If this self-regulation is carried through effectively, as I have no reason to doubt it will be, our objective will be met and there will be no need for Government intervention. On the other hand, if for any reason the brokers are unable to introduce a satisfactory and effective scheme of self-regulation, I must reserve the position to enable the Government to think again.
The Bill provides that the name "insurance broker" will be reserved for those who are registered under the scheme. Paragraph 12 of the consultative paper states why we think that a scheme is necessary. The main object of a system of regulation is to enable the public easily to be able to distinguish those brokers on whom they can safely rely for expert and independent advice from those who may not fall into that category. If the ordinary citizen is to be able to make that distinction easily, registered brokers must have a name to set 1916 them apart. I cannot think of a better name than "insurance broker".
Does that go far enough? If non-registered intermediaries are still able to hold themselves out as insurance advisers, insurance consultants and insurance contractors, might not the public still be misled? I hope that the new registration council, early in its career, will mount an effective publicity campaign to explain to the public the advantages of dealing with those calling themselves insurance brokers. That will to some extent minimise, though not totally obliterate, this danger. In any case, we have to look at the proposal in the light of the Government's total strategy, of which this is only one part.
As the consultative paper explains, ultimately we see insurance being sold only by registered brokers, by the companies and their accredited agents. When this happens, the public will be much more fully protected. That is at the end of the road, and we are not ready to go so far at present. The proposals of the brokers, as reflected in the Bill, mark a useful first stage in what we are seeking to achieve.
§ Mr. Tim Renton
Can the Minister give us any guidance about a Government timetable and say what action they have in mind with regard to agents and in implementing the proposals or remedies suggested in paragraphs 14 to 17 of the consultative paper?
§ Mr. Davis
As always, the hon. Gentleman is most perceptive. I have noticed that he frequently anticipates a point I am about to make. I will not lose sight of what he has asked but will deal with the question of insurance agents. I do not doubt that if it could have been accomplished it would have been much better to have dealt with the whole subject comprehensively, with insurance agents as well as insurance brokers. As the right hon. Member for Taunton (Mr. du Cann) has said, the best if is often the enemy of the good. There can be no doubt that this is a difficult subject.
Paragraph 16 of the consultative document refers to the Law Reform Committee and says that in its Fifth report of January 1975, itaddressed itself to this problem and recommended that any person who solicits or negotiates a contract of insurance should be 1917 deemed for the purposes of the formation of the contract, to be the agent of the insurers, and that the knowledge of such person should be deemed to be the knowledge of the insurers.This question was being posed in 1957. It still remains unanswered.
What we have done in our consultative document is to set out the nature of the problem. We urge those interested in the insurance world, and others, to address themselves to this important matter. It is extremely complex. One of the problems in relation to the law of agency is that a principal is liable for the act of an agent only if the agent is acting within the scope of the authority given to him by the company. If an agent acts outside that scope, he may be personally liable and no liability will attach to his principal.
The agent may be the agent of the other party, of the proposer and not the company. The agent may do something at the request of the other party. There is authority for the proposition that in at least some cases an insurance agent who fills in a proposal form at the proposer's request is the proposer's agent when he does so. If the agent fills in the form incorrectly, the company may repudiate liability because of an error even though the error is the fault of the agent. That illustrates the enormous complexity of this subject, the great uncertainty in which the law is, and more important, the uncertainty affecting the potential or actual policyholder.
Another problem is that agents do not form a coherent group. Firm information about the categories and numbers of agents is lacking. This is quite apart from the complication of their legal position. We are inclined to believe, as we say in paragraph 14 of the consultative document, that the best solution is to make it clear that the agents are fully the responsibility of the companies employing them. Notwithstanding the report of 1957 this subject has not been fully ventilated, and it is right that it should be.
More time is needed to garner the relevant facts and work out a comprehensive and detailed set of proposals that have a chance of commanding general acceptance. I do not deny that ultimately it will be of great benefit to con- 1918 summers, without placing an undue onus on insurers, insurers have to consider carefully their methods of selection and training of agents in the light of their new legal responsibilities. That would provide much greater certainty for the policyholder who would have the benefit of a more substantial defendant if he were forced into litigation.
Coming to the point raised by the hon. Member for Mid-Sussex (Mr. Renton), I hope that we shall be able to enjoy the full support of the insurance companies in seeking to achieve a satisfactory solution and that they will not, as is sometimes asserted in the Press, be complacent about the current position, saying that everything in their garden is rosy and there is no need for change.
I was a little sad to read in the statement of the British Insurance Association, sent to hon. Members in anticipation of this debate, the following:Members of the public may have drawn conclusions from recent publicity that the agents with insurance companies do not meet acceptable standards for carrying out their role. The Department is aware, however, that agents are appointed by insurance companies only after very careful consideration, that they measure up to the high standards of integrity and have the necessary business ability, and that the maintenance of these standards is under constant supervision.I do not doubt that in the generality that is probably the truth of the matter, but it reveals a somewhat complacent approach. I hope that there will be a more positive response than has been revealed in this document, which embodies initial reflections on these matters. I have every confidence, from my knowledge of the BIA, that this will be so.
My hon. and learned Friend the Member for Hackney, North and Stoke Newington raised the question of the creation of a closed shop and referred to the worries expressed by some that people will be put out of business or that professional men will somehow be disqualified from giving advice. I will also deal at this point with the vexed Thomas Cook issue. That firm has had a lot of free publicity today. Whether it would have received such publicity from Conservative Members when it was a nationalised concern I do not know.
When the Bill, in particular Clause 21, is implemented, the term "insurance broker" will be reserved. No one earning 1919 his living by selling insurance will be debarred from continuing to do so by any provision in the Bill. We have suggested some further curbs of insurance selling in our consultative paper, but these are tentative ideas which would require further legislation.
§ Mr. Weitzman
It may be true that such persons may not be debarred from continuing to do business, but does not my hon. Friend agree that their business could be seriously affected as a result of the passage of the Bill?
§ Mr. Davis
I do not deny that that could be the case. If we try to import higher standards into a professional activity or trade, those who do not apply those standards may well be adversely affected.
If, on the other hand, a man does not satisfy the criteria, or may not want to satisfy the criteria but still wants to be able to offer advice and consultation on insurance matters, having built up a reputation for integrity in a small locality, I do not believe that his position will be adversely affected by these changes. He has built up his clientele on the basis of his knowledge, his expertise and his ability to communicate well with his clients, and I do not think that his position will be adversely affected. The corollary of what my hon. Friend the Member for Battersea, South (Mr. Perry) suggests is that we should not import any higher standards. For reasons which I have already rehearsed, I think that that would be unacceptable.
I do not think that professional men want to call themselves insurance brokers, and they have never done so, so I do not think that the Bill will make any difference to them. The case of Thomas Cook is dealt with in the Bill. If Thomas Cook wants to call itself an insurance broker—I have no evidence that it does—it could come within the provisions of Clause 4(2)(b). I do not see that that presents any problems.
To sum up, while we consider that there are still some difficult problems to be worked out, and we do not delude ourselves with the belief that the Bill can provide a panacea, nevertheless we commend the Bill to the House as a useful, constructive and necessary measure for the protection of the insuring 1920 public. Once again, I congratulate the hon. Member for Harrow, West on introducing it. I have no doubt that we shall wish to suggest some amendments on points of detail in Committee, but in general this is a sound and well drafted Bill to which I hope the House will shortly give a Second Reading.
§ 2.32 p.m.
§ Mr. Tim Renton (Mid-Sussex)
The ears of my hon. Friend the Member for Harrow, West (Mr. Page) must be tingling with all the congratulations which have been showered on him by Members on both sides. I add my tribute to him and congratulate him both on his good luck in winning the Ballot and on the modesty and enthusiasm with which he presented the Bill today. As he himself said, the Bill deals with a pretty complicated matter for a private Member to take on board, but he presented it with great clarity, and I wish him good luck with it in Committee. He must have been particularly pleased to receive such a specific endorsement from the Minister and thus to hear that the Government will be supporting the Bill too.
§ Mr. Renton
In this case, I think, not so.
I have to declare some interest in this matter, not that I am an insurance broker or have any particular knowledge of the industry, but I am a member of Lloyd's, and I am delighted to note that Lloyd's Insurance Brokers Association is wholeheartedly behind the Bill.
My hon. Friend said that he was a caveat emptor and a caveat conductor man. I hope that he is one who uses Latin for nostalgic amusement rather than for profitable confusion, for in this case, as he asked me to sponsor the Bill as long ago as September, I am a "caveat sponsor" man. As my hon. Friend will know better than I, when one is asked to support a Private Member's Bill it is often on the basis of a fairly general description of what will be in the Bill. I agreed, after my hon. Friend had run through the basic principles with me, because I strongly support measures to raise standards in the insurance broking industry, but I wondered whether I should find it necessary, when the Bill was published, to remind myself of "caveat sponsor" and 1921 whether I would still be able to agree with my hon. Friend wholeheartedly.
On the broad principles of the Bill I am still in wholehearted agreement. For a Conservative Member, my hon. Friend has steered a difficult course between the Scylla of State control and the Charybdis of leaving this as a totally non-regulated industry. There are some points of fairly substantial detail on which I do not fully agree with my hon. Friend, and I shall return to those in a moment, but in general terms I think he has got it right. I was delighted to hear the Minister say that he felt the same.
There are those who think that the Insurance broking industry should remain totally non-regulated. Others, including myself, who sat through the Committee stage of the Policyholders Protection Bill and listened to the arguments that were then adduced, when we realised that the Bill would introduce a compensation fund from the insurance industry we wondered whether the public were being protected from the right people. We heard some stories—not many—of how insurance intermediaries had been very active in pushing the policies of Nation Life, a company that failed, and many of us then considered that there was a need for a measure of self-regulation to be introduced into the intermediaries' industry.
I felt that the insurance industry probably had a greater capacity to look after itself and put its own house in order than had the intermediaries' industry, where 7,000 brokers are involved and, as the hon. Member for Battersea, South (Mr. Perry) pointed out, 60,000 agents are also involved. All Members know the course of events since then, and that the British Insurance Brokers Council came into being. I would like to add my tribute to the work done by Mr. Francis Perkins in bringing forward that council's consultative document. The council suggested this self-regulatory body with suitable standards and a code of conduct that we see embodied in the Bill today, and we now have Government support for the Bill.
I would like to congratulate the Minister—I am sorry that he has just gone out of the Chamber, but perhaps hon. Members will pass on my congratulations—on having for once cast aside the dogma 1922 of State intervention and rejected specifically the alternative of State licensing, which was, of course, one of the alternatives that a Labour Government must have looked at in relation to the broking industry. It is very pleasant to hear a Government of any complexion saying forthrightly that it lacks the officials with the necessary expertise and that it would be difficult to acquire such officials, and that if they did acquire them the result could only be to increase public expenditure.
Perhaps the Under-Secretary of State will get himself transferred to the Department of Industry, where he could with equal success put forward the same arguments in that Department in relation to the ship repairing industry. I am sure that that Department would greatly profit from the benefit of the hon. Gentleman's new conversion.
However, it was a condition of ruling out State licensing that the broking industry should regulate itself, and I ask those of my hon. Friends who are against this principle to bear that in mind. There is the further fact that the EEC has introduced a services co-ordinating directive covering insurance intermediaries. I understand that the directive may go through and be passed into EEC law during 1977. If that be so, it is time that we got on with the job in this country of looking at the broking industry and seeing what we must do in order to comply with the provisions of the EEC directive.
My hon. Friend will know that that ends my congratulations. Although in broad measure I am very much in agreement with him, I wish now to turn to a few matters about which I am not quite so happy. The first and major question is whether the whole subject of the regulation of insurance intermediaries is too big for the Bill—is bigger than the Bill. I do not believe that it is, but this is a question which we must consider carefully in Committee, and I shall come back to it in a moment or two on the question of agents.
I cannot say that I fully agree with my hon. Friend the Member for Altrincham and Sale (Mr. Montgomery) when he says that he does not think that the cost would be a worry to the small insurance broker. I have checked with 1923 one or two small insurance brokers in my constituency, where there are some very active ones. They believe that the cost would exceed £700 a year. Bearing in mind that a number of small insurance brokers have a commission income of only £5,000–£6,000 a year, they felt that that would be too much. Some told me that it would drive many small insurance brokers out of business, especially as the commission on young lives, for example, has recently been cut.
My hon. Friend said today that he did not expect the cost to be as high as that. He quoted around £350. But there are two areas where he and those advising him might look further at the cost before we come to the Committee stage. The first is the guarantee fund. Many small brokers specialise only in life and pension broking. The premia they receive come in cheques payable to the insurance company. They do not want to receive moneys made payable to themselves. I understand that the object of the guarantee fund is primarily to cover a broker's going bankrupt when he owes moneys to the insurance company for premia which he has not passed on.
Would it be possible to consider a situation in which the insurance companies insisted on the premia being paid to them by the client, with the cheques being made out in their names, so that those funds could not stay with the small broker? They would not be encashable by him. Would it then be possible to minimise the contribution to the guarantee fund, making it a minimal figure, because there was far less risk than is now envisaged? That suggestion is particularly appropriate to the life and pension brokers, because cover does not begin until the moneys are received by the insurance company. Therefore, there is a particular reason why the cheques from the insured should be made out in the name of the insurance company rather than in the name of the broker.
§ Mr. John Page
There will have to be consultation about this matter. But I do not see that it is necessary for it to be a paid-up fund. I believe that the brokers should have on call £100, say, which could be called up if necessary. In a brief which was sent round, I saw a reference to a figure of £100 per annum. That could 1924 mean, and I think that it should mean, £100 permanently on call, not £100 paid out each year. I see little reason why there should be a call on the fund.
§ Mr. Renton
I take my hon. Friend's point. I think that the wording of that helpful brief, a copy of which I also received, was "contingent liability". That liability would be on the broker. In effect, it would be a call on him which could be made at an unspecified date. A reputable broker would have to take into account that that call existed, and it would appear on his audited accounts.
The main item is in the cost of the professional indemnity. In reply to an intervention of mine, my hon. Friend said that the figure he had in mind was £250,000 for professional indemnity cover. Many life and pension brokers in particular have told me that they regard that as unnecessarily high. They point out that the largest premium they receive in a year is £10,000 single premium and that their gross commission income is about £6,000–£7,000. They see no justification for so high a figure for professional indemnity cover. Because they are small men, perhaps operating from their houses, they thought that the cost of that cover could be as much as £500 a year for £250,000. The figure has alarmed a number of them, and I hope that my hon. Friend will look into that item as well.
We all hope that the Bill will succeed. Its main objective is to include as many small brokers as possible. I know that that is my hon. Friend's wish. There is no question but that the large insurance brokerage firms will join, but we want to be certain that the good, single-man businesses can also afford to join and that they can afford to continue to use the title of registered insurance broker, which will have enhanced status. I am sure that my hon. Friend does not want to do anything that will frighten away the small man.
I have had some brief consultation with the Life Insurance Association, which is not a member of the British Insurance Brokers Council. It now has a membership of about 2,900, which I understand is growing at the rate of several hundreds a month. It has a projected membership of 5,000 by the middle of this year. The membership is composed about fifty-fifty of brokers and direct salesmen 1925 operating from the life offices. I think that my hon. Friend would find it worth while to have a word with that body in the course of the consultation before the Committee stage, if he has not already done so.
The essential point that worries that association is the blurred distinction between the broker and the agent. It feels—obviously this is reflected in its membership—that there is a growing number of people who are tied to one company but who must sometimes, particularly for the larger policies, write business with other companies.
§ Mr. Renton
I spoke of people who were tied to one company but who must, particularly on their larger policies, write business with other companies, or who felt that in order to meet competitive conditions they must go to another company at times.
Sub-paragraph (a) of paragraph 18 of the Government's document—I gather that it is a Green Paper, although the colour is white—refers toa truly independent adviser".Sub-paragraph (b) refers as an alternative to an adviser whoif not independentisanswerable to an identifiable insurance company".The Life Insurance Association would add a sub-paragraph (c) simply saying "or both". It says that one can belong to both categories.
That underlines the difficult of not dealing with agencies and agents in the Bill. The Under-Secretary made it clear that the Government would have liked to do so but that they were not yet ready. Until we do so, the borderline between brokers and agents will remain blurred and confused. One wonders just how effective the Bill will be in regulating only brokers, because all those who either cannot meet the standards or do not wish to do so will be able to remain agents and write a great deal of business under that nomenclature without any regulation. That is not totally desirable state of affairs.
1926 I am told that there is a class of legislation known as legislation ad terrorem. That is legislation that one has no hope of putting into compulsory practice but which one hopes may be effective by putting the fear of God into us all. Laws against contraception and alcoholism would fall into that category. I would be very sorry if this Bill fell into that category—if its only purpose were to put the fear of God into people in the insurance broking industry but without being effective, because so many people could continue being agents for insurance companies.
There is another solution which was touched on by the hon. Member for Battersea, South, who has an extensive knowledge of the business. If an agent for an insurance company did not conduct himself properly, he would fall into bad odour with his employers and might be sacked. However, that man could get another job as an agent with another insurance company straight away. The second company, being very keen to increase its share of the market, might take him on without checking the facts. If the second company knew that he had been sacked it might take him on anyway, thinking that he was a reformed character and would do better.
It should be possible for insurance companies to exercise greater supervision over the methods by which they appoint agents and to have some sort of a black list between themselves. When an agent acted disreputably on behalf of one insurance company, it would then be seen that no other company would offer him a job as an agent. This might go some way, in a self-regulating manner towards controlling the activities of company agents.
I agree with the Minister when he says that this problem is too big, and there are too many people involved, for it to be dealt with in this Bill. But it is a major lacuna. Until the problem of agents is solved, the whole area of supervising insurance intermediaries will still be dealt with in a half-hearted manner and there will be a considerable gap.
The Bill certainly commends itself to me in general terms. Insurance broking is an international industry which contributes handsomely to our annual invisibles. As the insurance industry grows, the insurance broking business grows as well. 1927 Sixty per cent. of insurance company premia comes from risks written overseas. That shows what a foolhardy suggestion it is from some Labour Back Benchers that we should nationalise seven insurance companies. If that happened, 25 per cent. of business in Australia and Canada would be nationalised too, and that would not be at all popular in either market. The Bill is a step forward in the discipline and continual growth of one of Britain's most successful international private industries. I congratulate my hon. Friend the Member for Harrow, West and wish him well today and in Committee.
§ 2.55 p.m.
§ Mr. Arthur Jones (Daventry)
I add my congratulations to those already given to my hon. Friend the Member for Harrow, West (Mr. Page). I know that he takes these congratulations in the sincere spirit in which they are made, but he takes a rather lighthearted view of these matters. Nevertheless, I am sure that he realises the responsibility resting on him to ensure the successful course of this Bill. I hope that he is more successful than I was when, in 1965, I was first in the Ballot and tried to get a Bill on estate agents through the House. It was lost in the dissolution the following year.
I declare my interest as a director of a provincial company of brokers which is in membership of the Corporation of Insurance Brokers. It is run by some competent colleagues of mine, and it means that I have some practising experience of both the agency system and insurance brokerage. This business rested upon what was originally an insurance agency and over the years it has grown significantly, and now it has widespread interests in the South Midlands.
My interest leads me to contest the provision in Clause 3(1) that a person being a director of a body corporate practicising insurance brokerage is a person suitably qualified to be called an insurance broker. Although I am a director of my company and have been since its incorporation, I do not consider myself, after many years of only remote association, able to enjoy the qualification of being able to set up on my own as a broker.
There is an important question of principle here. I am anxious that nothing 1928 should be done to handicap unreasonably enterprising people employed now in the insurance industry, and I was surprised to see the restrictive nature of the qualifications in Clause 3. It seems to me that many people who have gained their experience and are employed in insurance companies would be able to bring necessary expertise and knowledge to the business to enable them to be perfectly capable of fulfilling the job of an insurance broker. The Bill is unnecessarily restrictive in that respect. I hope that my hon. Friend the Member for Harrow, West will look at this later.
When I was listening to my hon. Friend on the question of being "seriously inclined" to be a true insurance broker I noticed that this was referred to in a brief with which he had supplied us earlier. I am disturbed about incorporated companies having an insurance section managed by someone qualified to be a broker. It may be necessary to make the existing arrangements equitable, but it challenges to some extent the principle behind the Bill and the significance attached to insurance brokers. We shall see insurance brokers not practising as such but perfectly qualified actually in the departments of much larger organisations, and that is not quite what many of us see in the title of insurance broker.
I congratulate the Government on Schedule 1 and the chairmanship of the proposed council. This is extremely important. Paragraph 1(a) of the Schedule says… of whom one shall be Chairman of the Council.This is one of the 12 persons nominated by the British Insurance Brokers Association. One of the disappointments which occurred in the subsequent developments concerning the registration of estate agents was that, although an estate agents' council was formed and the Government took on the responsiblity of appointing its chairman, for reasons best known to themselves they appointed someone who knew nothing about the business and all that was involved in practising and professional terms in an equally extensive professional organisation and company activity.
The proposals in paragraph 1(a) indicate to me a much sounder approach and that the chairman, being one of the 1929 12 persons nominated by the British Insurance Brokers Asssociation, will be someone who clearly has a sound and widespread experience of the insurance brokerage business. That is highly desirable.
Turning to the capital requirement, £1,000 is a ludricrous sum in modern terms bearing in mind how it will be affected by inflation. I do not feel that the capital involved has any significance. What is much more important is the guarantee of sound practice and financial viability rather than the need to find an amount of capital to provide typewriters in an office. In this connection, my hon. Friend the Member for Harrow, West referred briefly to the two rear wheels of a motor car, which I thought was a strange analogy.
It is these small areas to which I want to draw attention. I am confident that this is a desirable measure, and I have every hope that the House will give it a fair wind. I wish my hon. Friend every success.
§ 3.0 p.m.
§ Mr. Ivor Stanbrook (Orpington)
I wish to raise one brief but not unimportant point. It concerns what I think the general public may regard as the dubious morality of insurance brokerage.
The Minister said that the code of conduct would refer to provisions for ensuring the independence of brokers in their relations with insurance companies. But we cannot ignore the fact that the earnings of insurance brokers are derived almost wholly from insurance companies. It must be a very difficult professional task for insurance brokers to give objective advice about the relative merits of different policies independently and ignoring the financial benefit which they themselves may derive from any individual policy.
At common law the relationship between agent and principal is such that it would be a breach of that relationship for an agent to accept a hidden commission from a third party concerning the same transaction. It seems to follow, therefore, that any charge made by the agent to the principal in connection with that transaction could not be enforced at law and would not be recoverable. I 1930 wonder how far this is appreciated by the insurance brokers' profession.
I say that because of an experience which I had a few years ago when I sought the services of a firm which is no doubt highly reputable in the profession—Hartley, Cooper & Co. Ltd.—concerning the insurance of my home. The company arranged the insurance and, subsequently, I sent it the annual premiums. After a while, in sending me a notice for the payment of the premium, the company added what it called a "charge". It was only 5s., but it seemed an important matter, and I queried it. The answer which I received from the company was:… in answer to your inquiry concerning the 5 shillings duty charges … this is now being made to help us offset the increasing cost of administrating insurance documentation. … Insurance companies have now ceased making certain allowances to brokers for various costs and we feel that a flat fee per policy is the easiest and fairest method of application.I wrote back saying "You are my agents. If you are being paid for the transaction by the insurance company, surely you should look to them for reimbursement of your costs in the work which enables you to get this money from them." A director of the company, a Mr. Southern, wrote back sayingI would like to point out that we are fully entitled to charge any amount we see fit in view of the rising costs of servicing small accounts.It seems to me that if that is the attitude of insurance brokers, they must be aware that when members of the public encounter such problems they regard the whole profession with some doubt.
I submit that it is immoral and also illegal to charge the policyholder for costs incurred in connection with the work that they do while at the same time receiving a hidden commission from the insurance companies. I hope that this point will be taken into account when the code of conduct is prepared so that we may know specifically whether insurance brokers are by law entitled to charge the policyholders for their services while at the same time, unbeknown to the policyholders, getting what may be a substantial amount from the insurance companies.
§ 3.7 p.m.
§ Mr. R. A. McCrindle (Brentwood and Ongar)
I start by declaring an interest as the parliamentary consultant of the British Insurance Brokers Association, and it is on its behalf as well as my own that I should like to add to the plethora of congratulations directed to my hon. Friend the Member for Harrow, West (Mr. Page). I should add that few know better than I the quantity of midnight oil that has been burnt by my hon. Friend during the last few weeks in coming to grips and, I believe, very successfully, with the intracacies of a business with which previously he had not been associated.
Let me now reflect on something which has been said reepatedly in the debate, both by my hon. Friends and by the Minister concerning the whole business of caveat emptor or "Let the buyer beware". I have never been under the impression that when a person buys an insurance policy, as distinct from any other commodity, caveat emptor applies. As one of the few in this House who hold a diploma in insurance, for which I studied for several years, I should say that I was taught that the whole basis of purchasing an insurance policy was iuberrima fides which, freely translated, means "Of the utmost good faith".
That means that the purchaser is buying something which is totally intangible, that the proposer must approach with full honesty and that the insurer must react with full honesty so that there is no question of selling someone something which subsequently he might find was not what he thought it was. So this concentration on caveat emptor is wholly out of place in our discussion of insurance.
Another aspect is the whole business of whether a reform of agency should be included with the reform of brokers if the exercise is to be meaningful. I do not believe that it would be at all wise to hold up the agreed proposals on which my hon. Friend's Bill can go forward simply because we are not yet able to do anything about the tangle which is agency. Perhaps I may remind the insurance companies that they have a sizeable responsibility to pay greater attention to the terms on which they appoint their agents and to the supervision that they direct towards 1932 them, which sometimes in the past has been found wanting.
It will be no surprise to the House to hear me address it on a debate about insurance. I have been repeatedly involved in such debates and repeatedly I have stressed the indivisibility of insurance in this country. One cannot seek to regulate the insurance companies without in some ways involving the broker from whom the article is purchased. The Minister will I am sure, agree that during the long debates on the Policyholders Protection Act I was to the forefront in regretting that at that time brokers seemed somehow to be standing apart and to be prepared to leave insurance companies to take all the responsibility.
I recall very well urging the brokers to recognise the indivisibility of the insurance world. I remember urging them to come together and to stop speaking with different voices. It was with pleasure that I heard, shortly after that—although I doubt that it was as a result of my words—that the British Insurance Brokers Council had been born. I congratulate the members of the four associations responsible for that. I echo what was said earlier about the indefatigable Mr. Francis Perkins. His leadership has contributed greatly to the improved situation.
I would like those who claim that the small broker is attacked by the Bill to consider two of the constituent associations of the BIBC. The council includes the Federation of Insurance Brokers and the Association of Insurance Brokers and their membership includes many who could not by any stretch of the imagination be called other than small brokers. As a believer in the small man I would not support the Bill if I thought that there was the slightest chance that it would prevent small firms from continuing their service to the public. In 1977 no one can seriously suggest that an estimated cost of £325 per annum would achieve that result.
Four bodies that had previously had separate existences are now working together, and that is little short of miraculous. The fact that they have been able to produce the proposals upon which the Bill is based is a testimonial to their ability to work together. The 1933 Bill is based on the twin pillars of professionalism and consumer protection. Insurance broking must become a profession because the sins of the few have been visited upon the many.
Insurance brokers have, in recent years, become less acceptable in the public opinion than we would wish. Insurance brokerage has always been a trade, not a profession, and in being a trade it has sometimes picked up the worst excesses of the market place. The Bill, in so far as it deals with insurance brokers as a class of business people, is the beginning of professionalism, educational attainment, and an assurance for the public. They will be able to assume that the term "insurance broker" means more than it does now in a number of instances.
The Bill also concerns consumer protection. A person about to purchase an insurance policy from a broker must be given the feeling that he is patronising someone whom he can trust implicitly and who will be able to serve his requirements. Parliament took steps under the Insurance Companies Act 1974 to control insurance companies and under the Policyholders Protection Act to assure the public of the standard of insurance practices. It is now time to extend this to the wholesaler. He cannot escape his part of the responsibility for the public opinion of insurance.
There are few businesses in Britain today that are more stepped in private enterprise than insurance broking. Private enterprise is the lifeblood of insurance brokerage. Therefore, I would not be prepared to support anything that would stultify the private enterprise and initiative that is the watchword of many brokers. But I defy anyone to suggest that the Bill does that.
My hon. Friend the Member for Faversham (Mr. Moate) believes that it will, but today he spoke in glowing terms of the Policyholders Protection Act which he did not support when it was a Bill. Therefore, there is hope that after a few weeks in Committee we shall be able to enlist his support.
Insurance notoriously is a business for the middle man. That is a good thing and we must maintain that situation. It is also a business in which people gradu- 1934 ate from the ranks of insurance companies. Opposition Members warm to enterepreneurs and take the view that tall oaks from little acorns grow. If that principle were not obeyed in the provisions of the Bill, I would not wish to support it. I would not contemplate the introduction of a closed shop in insurance broking.
As I listened to my hon. Friends speaking in strictly academic terms, I thought I should tell the House that I am probably the only speaker today who can speak a little less academically than most, because I have been the little-man broker. I graduated up the scale from a company inspector. Therefore, I know a little about the strictures that have been directed at the system by a number of hon. Members.
Many years ago I began a business with a staff of one. I began with a bunch of proposal forms, a gleam in my eye, and a conviction that the world was my oyster.
§ Mr. McCrindle
What happened was that I came to this House and the situation altered slightly. Eventually, I became the chief executive of a not insubstantial firm. As I look back I must confess that I am not sure that I was fit to become a broker at the time I did. Although my knowledge was limited, I do not believe there was any power in the land that could have stopped me, or indeed any redress on the part of the client.
I was delighted that my hon. Friend the Member for Harrow, West said that in Committee we could examine many of these matters of yardsticks. From a practical point of view we must dismiss any myth that all a person has to do to set up a business of this kind is to collect a number of proposal forms and just watch the company grow from strength to strength. There are other people involved, namely, the British public, and they must be protected. We shall protect the public only by lifting the standards and by becoming a true profession. Let us encourage the company inspector to gain the expertise that is required. If a man is fired with the ambition to do well in this business, a shortish interim period will do him no harm.
I recently made a speech in which I said that the view of the average person 1935 about an insurance broker was not a good one. It involved the image of somebody who sold motor insurance without necessarily worrying whether claims would ever be met, the mortgage broker who promised things that he sometimes could not deliver, and the man who gave incorrect investment advice. We all realise that those people bring calumny on the work of good insurance brokers. If that is the public view, we should grasp the opportunity presented by the Bill to lift standards and to ensure that when in future somebody patronises an insurance broker he can do so with confidence.
That is one of the reasons that I go along with the Bill so wholeheartedly. The alternative is to waste the opportunity and to enshrine in the public's mind all that they believe to be wrong with insurance brokers. We must take great care that that does not happen.
My hon. Friend is to be congratulated. He has a Bill that can be changed and improved in Committee but a Bill that goes to the heart of what is necessary for consumer protection. It ensures that in future when a person goes to someone who is able to call himself an insurance broker he will do so with greater confidence than has ever been possible in the past.
§ 3.21 p.m.
§ Mr. John Page
With the leave of the House, Mr. Deputy Speaker; whoever would have thought that on this Friday morning we would go from Pinner to Outer Mongolia and back to Battersea with a gleam in our eyes? However, we have succeeded in doing so. I should like to comment on all the speeches that have been made but it is unnecessary to do so because all the points have been made so clearly. Another reason for not doing so is that my hon. Friend the Member for Warwick and Leamington (Mr. Smith) will be introducing an important Bill. Further, I have a personal interest in the shortness of this debate because I have not left the Chamber since 11 o'clock this morning.
1936 In our discussions we have touched on many central issues, all of which must be given close examination and thought in Committee. First, there is the future pattern of the industry as a whole and the position of agents. In that respect, I think that we received a most helpful and important statement from the Minister. Secondly, we have a whole group of conflicting interests that must be examined—for example, improving the status of the industry, protecting the public, encouraging enterprise and exposing the public to insurance opportunities. We must find the proper balance for all those matters because they are all of importance.
Thirdly, we must consider qualifications for registration. That has been referred to by almost everyone who has participated in the debate. Fourthly, we must examine costs of registration, costs of indemnity insurance and contributions to a fund. Those are all extremely relevant issues.
I believe that every point that has been made today had been discussed with different people before the debate took place, except that raised by my hon. Friend the Member for Orpington (Mr. Stanbrook), on which I shall try to obtain the best possible legal advice.
I hope that the House will feel that the debate has been worth while. I believe that hon. Members on both sides of the Chamber feel that the Bill is worth while. If it is given a Second Reading and it goes into Committee, let us hope that in the end we shall provide a Bill that receives almost universal support among consumers, among the public and among the insurance industry at home and abroad. Let us hope that it will be considered that we have used these few hours wisely and well.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).