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§ Mr. Deputy Speaker (Mr. Ernest Armstrong)With this it will be convenient to discuss Government amendment No. 30.
§ Mr. EyreIn Committee, the Member for Hackney, Central (Mr. Davis) raised the question of the range of business that banks may write
solely in the course of carrying on and for the purposes of banking business.I agreed to consider the matter, and these amendments are the result.The comprehensive classification of insurance business, which was first introduced by the Companies Act 1967, endured until the Insurance Companies (Classes of General Business) Regulations were made in 1977 as part of the implementation of the non-life establishment directive. Those regulations naturally included transitional provisions for converting authorisations for the old classes of business into the new with as little disruption for the industry and my Department as possible. I am advised that a number of insurance companies insuring against medical expenses had been authorised for the old class, known as "pecuniary loss insurance business." For that reason, the transitional arrangements to which I have referred converted "pecuniary loss" into class 1 accident and class 2 sickness, as well as classes 14 to 17 where the correspondence was obvious. That extension of pecuniary loss to cover accident and sickness applied to banks as it did to others concerned with that class of business.
733 My officials have held discussions with representatives of the banks, who have explained that it is their common practice to waive or defer repayment of personal loans in cases of death, sickness or other adversity. That practice is clearly beneficial to consumers. The banks expressed concern that deletion of classes 1 and 2 from clause 2(4) might preclude them from this practice in future. My officials have explained to them that if one waives a debt due or reschedules its repayment that is not insurance business, and there is no need on that account to leave classes 1 and 2 in the exemption for banks. Nor is there any other reason for doing so. This amendment therefore removes those two classes from clause 2(4).
It is also necessary to make the identical amendment to paragraph 1(b) of schedule 3, which deals with section 12(5) of the 1974 Act. Section 12 exempts banks from the requirements of part II of the 1974 Act even if they carry on certain classes of business
solely in the course of carrying on and for the purposes of banking business.The amendment removes classes 1 and 2, accident and sickness, but leaves in place classes 14 to 17.
§ Mr. Clinton Davis (Hackney, Central)I am very pleased that the Minister has agreed to deal with this matter, as he said earlier. It makes a great deal more sense. I am sure that it will commend itself to the House.
§ Amendment agreed to.
§ Sir Graham Page (Crosby)I beg to move amendment No.2, in page 2, line 29, leave out subsection (5).
§ Mr. Deputy SpeakerWith this it will be convenient to discuss amendment No. 14, in page 12, line 1, leave out Clause 16.
§ Sir Graham PageI am sure that many right hon. and hon. Members pay a subscription each year to a motoring organisation in order to put a little label stating "Relay" on the back of their cars. Of course, our motoring organisations are reputable concerns. The label ensures that if our car breaks down or if we have an accident our car will be returned home or sent to its destination. That is a form of insurance. However, I understand that on the Continent there is fierce competition between organisations for this business, and that one organisation recently failed and caused some hardship to people there.
It is not surprising, therefore, that the Community would wish that form of so-called insurance—insurance which gives benefit in kind, and not necessarily in money—to be under insurance control. The directive from the Community in 1973, which imposed considerable control on insurance companies, has been carried into our law in subsequent legislation, but now we have a draft directive, 4335/81, from the Community to extend that control to insurance which gives benefit in kind. It seeks to amend the first directive, 73/239/EEC, on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct insurance other than life insurance, particularly as regards tourist assistance. That is the sort of assistance about which I have been speaking, which is offered by our motoring organisations here and is offered on the Continent in a far more competitive way by organisations there.
734 I understand that in Britain the practice is to treat assistance of that kind as not coming within the control of the insurance legislation, and that seems to be confirmed in clause 2(5). Clause 2 provides, in subsection (1):
Subject to the following provisions of this section, no person shall carry on any insurance business in the United Kingdom unless authorised to do so under section 3 or 4 below"—that is, unless authorised by the Secretary of State, or unless it was duly authorised under the 1974 legislation. But there is an exception to that in subsection (5):Subsection (1) above shall not apply to … insurance business … under which the benefits provided by the insurer are exclusively or primarily benefits in kind.That seems to confirm the present practice that we do not think of this kind of service as part of the insurance law under which we submit to the sort of controls desired by the Community.But there is a contradiction between the draft directive and the Bill. It would be most unfortunate if we passed the Bill in its present form and then, perhaps a year later, had to obey the EEC directive to delete this exception to the rule and bring our motoring organisations providing this service under strict insurance company control. It would be not only unfortunate but rather ridiculous when one thinks of the sort of controls that we would have to have. For example, the AA and RAC—this is not a commercial; it is by way of example—would have to show that they had funds sufficient to return cars home or take them to the desired destination for all their members throughout the year, and they would have to show that they were maintaining those funds. I do not know how it would apply.
This is, of course, a probing amendment. I would not wish clause 2(5) or clause 16 to be taken out of the Bill. However, I should like an assurance that the Minister is confident that the Government will be able to get the draft directive amended so as to comply with the Bill before it is accepted by the Community. Otherwise we shall be in great difficulty, because we shall be unable to obey the directive without repealing recently enacted legislation.
§ Mr. EyreI am grateful to my right hon. Friend the Member for Crosby (Sir G. Page) for moving this probing amendment. In my explanatory memorandum to the Select Committee on European Legislation &c., which commented on the draft directives on assistance insurance, I drew attention to the provisions in clause 2(5) and in clause 16. I confirmed that it was our intention to use those powers to exempt organisations offering roadside assistance and no other insurance contracts from the authorisation and supervisory requirements of insurance legislation.
My right hon. Friend rightly drew attention to the possibility of conflict between the draft directive and the envisaged exempting regulations. This provision does not pre-empt the application of the directive in the United Kingdom, if and when it is adopted. If the directive were adopted in its present form it would prove necessary, within the time scale laid down for its implementation, to revoke the regulations. Such revocation would entail the difficulties that I referred to on Second Reading and in Committee. In that connection, my right hon. Friend fairly referred to the valuable services rendered, for example, by the AA, which would not be helped. It does not seem sensible to anticipate those difficulties by not making changes in the law now. The changes are desirable and sensible and should be made.
§ Mr. Clinton DavisThe hon. Gentleman said "if and when" the directive was adopted. Is his Department likely to endorse the directive? What time scale does the hon. Gentleman have in mind?
§ Mr. EyreI try to be as helpful as possible. I was about to consider that point.
It does not seem sensible to anticipate those difficulties by not making these changes in our present law. The underlying principles in the draft directive have yet to be appraised, let alone approved by the council working party of Government representatives. Certainly its individual provisions are open to amendment.
In my explanatory memorandum on the directive I pointed to the inappropriateness of attempting to apply to assistance organisations measures embodied in existing Community legislation. The non-life establishment directive of 1973 was clearly intended for the supervision of insurers offering financial benefits. It is too early to speak with any certainty on the degree of possible conflict with the Bill.
Doubts have been expressed to the effect that clause 2(5) and clause 16 allow for a wide range of exemptions from authorisation and supervision. I emphasise that our present intention is to exempt only roadside assistance and vehicle recovery.
On the point raised by the hon. Member for Hackney, Central (Mr. Davis), I stress that we are still at an early stage in the proceedings on the directive. As he will know from his ministerial experience, decisions in the Council of Ministers are generally taken by consensus. In practice, the question, for example, of veto does not arise. If a member State feels that very important discussions are at stake, it may ask for discussions to continue until all member States are in agreement. Therefore, it will be some time before we can speak authoritatively about the directive's eventual form.
§ Sir Graham PageI am grateful to my hon. Friend the Minister for his remarks. I had hoped that he would say that we should try to resist the directive in this respect. There may be a debate on the report from the Select Committee on European Legislation &c. If so, I am sure that the proposition that such a provision should not be included in the directive will receive the backing of the House, provided that it is possible to negotiate its exclusion. It is right not to give way by removing the clauses from the Bill. Let us include them in the Bill and thereby pre-empt the application of the directive. I beg to ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.