LIST OF BODIES CORPORATE CARRYING ON BUSINESS AS INSURANCE BROKERS (Hansard, 25 July 1977)

§ Mr. Clinton Davis
I beg to move, That this House doth agree with the Lords in the said amendment.
The amendment is necessary to ensure that the list of enrolled bodies corporate includes Lloyd's brokers as well as those who qualify for enrolment under subsection (2).

§ Mr. Moate
I am grateful again to the Minister for the brevity of his explanation. However, I do not think that the matter can be left like that.
This amendment relates to matters of some considerable significance, but it is very oddly drafted. I understand from the arguments originally advanced when it was moved in another place that it was necessary to broaden the phraseology in Clause 4 to ensure that Lloyd's brokers would be brought within the definition of the bodies which are entitled… to be enrolled therein". As the clause reads at present, there is a reference to the bodies which are entitled under subsection (2) below", and it leaves out any reference to subsection (4), which reads: a body corporate shall be entitled to he enrolled in the list if it satisfies the Council that it is accepted as a Lloyd's broker by the Committee of Lloyd's. Surely it would be simpler to say the bodies entitled under subsections (2) and (4) below". That would embrace Lloyd's in the sensible and desirable manner. But the phraseology has been changed so that it now reads: all bodies corporate which are entitled under this section". That allows one to consider the reason for this proposition. We know that a number of different bodies corporate will be entitled to be registered and to practise as insurance brokers. Subsection (2) says: a body corporate shall be entitled to be enrolled in the list if it satisfies the Council (a) that a majority of its directors are registered insurance brokers; or (b) in the case of a body corporate having only one director, that he is a registered insurance broker; or (c) in the case of a body corporate having only two directors, that one of them is a registered insurance broker and that the business is carried on under the management of that director. Their Lordships' amendment refers to all these categories of bodies corporate, and further extends it to include Lloyd's brokers, under subsection (4).
I wish to raise two matters. The first is that of course it makes sense that Lloyd's brokers should have automatic qualification. Lloyd's brokers have to go through very considerable tests in 251 order to remain Lloyd's brokers. They have to stand up to solvency tests. They have to make solvency returns. There are much greater safeguards for Lloyd's brokers than there are generally for brokers throughout the country.
There could be legitimate ground for complaint from many small brokers who will have to go through these routines when they see many of the substantial Lloyds's brokers getting through these fairly stringent tests far more easily. It might be an unfair suspicion, but we do not know the terms and conditions under which the small brokers might have to register. We do not know the accounting criteria which they will have to meet or what surplus of assets over liabilities they will have to declare. It is possible that they will have to meet conditions more stringent than those applied to Lloyd's brokers. That would be unfair, but it is difficult to say whether it would be fair or unfair until we see the regulations. Lloyd's brokers would be seen by other brokers as a privileged group. There would be a sensible request for them to gain exemption, but it is important to make sure that the small brokers throughout the land are not discriminated against in this respect.
Individual brokers will have to submit accounts at regular intervals—it could be annually—whereas Lloyd's brokers have to produce solvency certificates. I would not like to think that the small broker would have to produce a relatively greater surplus of assets over liabilities than one of the large Lloyd's brokers, and I am sure that the House would not wish to grant privileges in that respect. I suspect that when the Secretary of State considers the regulations he will bear that point in mind. I think that for the good of the insurance broking industry generally, it is right that there is no preferential treatment accorded to one group compared with another group.
The other point relates to the question of bodies corporate which are entitled to registration. I wish to refer to Clause 4(2)(a) which refers to a situation in which a majority of its directors are registered insurance brokers". I wish to register a protest that my hon. Friend the Member for Harrow, West (Mr. Page) and the promoters of the Bill 252 have not seen fit to modify that most unreasonable proposition. There are many substantial commercial houses which have within them insurance broking departments, and they are insurance broking departments in every sense of the word. They carry on business for the benefit of the public. There is no suggestion that they are in any sense doing the public a disservice, but under these provisions such bodies will have to alter their constitutions.
I am referring in this context to certain banks—in other words, to large banks with substantial insurance broking sections. These are departments of firms, not separate limited liability companies. Since they are departments, the majority of the directors of the bank would not be registered insurance brokers. I put this point to the promoters of the Bill, but they did not agree with it—

§ Mr. Clinton Davis
Deal with the amendment.

§ Mr. Moate
The Minister tells me to deal with the amendment. But I would remind him that the amendment relates specifically to bodies corporate which are entitled under this section"— and that paragraph (a) includes this point. Therefore, the Minister before making such comments should carefully study the amendment we are debating.
The promoters of the Bill have done a grave disservice to certain of our banks. Banks are only one of the examples to be given. No doubt large contracting firms have insurance broking departments. But by the provision as it stands such people will be disqualified from calling themselves insurance brokers. Can anybody say what good that does to the public? I suggest that it does the public no good whatever. This is making a change for change's sake, and indeed for bureaucracy's sake. It could be achieved by a relatively minor amendment, without doing any damage to the Bill. But since that has not been done, it is one more reason for objecting to the Bill.
The Lords amendment is not very well drafted. Its object could have been achieved much more easily by extending it to include the Lloyd's brokers' subsection, subsection (4). But as it clearly remedies a serious defect in the Bill, the House should agree with their Lordships.

§ Mr. Body
We should be given an explanation why this gap has had to be filled by the other place. One wonders why those drafting the Bill overlooked the matter. I acquit my hon. Friend the Member for Harrow, West (Mr. Page) of any blame, as he is not a member of Lloyd's and is not in the insurance business. But it is astonishing that at this late stage we should have to amend the Bill to include Lloyd's brokers. It is obvious that they should have been included from the beginning. They should have had an explanation from those in charge of the Bill why they were overlooked.