Mining Subsidence (North Yorkshire) (Hansard, 30 January 1997)

§ Mr. Michael Alison (Selby)

I am glad to have the opportunity to raise on the Adjournment an issue which is causing anxiety and detriment to constituents of mine in the Selby district of North Yorkshire. The issue relates to the costs and possibilities of insurance cover for houses and householders whose property is affected by coal mining subsidence. The Selby district is particularly susceptible to the difficulties that I shall outline, because our local complex of mine workings is one of the largest and most modern in Britain, if not in Europe, extracting vast quantities of coal day and night under a huge local coalfield area, extending to scores of square miles.

More widely, coal mining subsidence, for all the recent diversification of our energy base, continues to be a huge and costly problem. At the end of October 1994, a Department of Trade and Industry press notice stated that British coal had settled 7,594 claims for subsidence that year, about one third of them in Yorkshire, at a cost of nearly £40 million.

That press notice, incidentally, was issued in the context of the introduction and appointment by the Government of an independent subsidence adviser, specifically to help protect the rights of those affected by coal mining subsidence. That initiative was as desirable as it was commendable, and the office of the subsidence adviser is now firmly established in Nottingham.

It is against that background that I want to draw the attention of my hon. Friend the Minister to a problem which the subsidence adviser has precisely pinpointed. Following a trawl which his office has made of several insurance companies, he wrote on 15 March 1995 to a firm of surveyors in Yorkshire who have been professionally retained by some of my constituents: The insurance companies themselves have confirmed that they are more than willing to effect new insurance cover to properties in known coal mining areas provided that the property in question has no history of subsidence damage. None of the companies I have spoken to will effect new cover on a property with a history of subsidence damage, whatever the cause of the subsidence. The refusal of new cover that the subsidence adviser pinpointed is the experience of a number of my constituents in the Selby district and more widely in North Yorkshire, who have approached many insurance companies about household insurance cover. The refusal of new cover is the tip of an iceberg of financial and other detriment, which goes far wider than the narrow problems of structural damage or defects that the Coal Mining Subsidence Act 1991 was designed to tackle.

I remind my hon. Friend the Under-Secretary of State that, in an area of active coal mining such as the Selby coalfield, a period of suspended animation, so to speak, may apply between a phase of underground working, resulting in structural damage to property, and the Coal Authority's willingness to repair that property. Sometimes the repair work must wait for up to three years—even longer, in some cases—to make sure that the subsidence has settled and is complete, and thus to avoid abortive reinstatement.

569 That is the background against which some of the worst problems arise for those seeking insurance cover. The three essential problems that they face relate, first, to the fact that they cannot take advantage of the many offers of cheaper insurance. That applies especially to householders whose insurance was, until recently, controlled by mortgage companies.

Secondly, there are the problems of those who are trying to buy or sell property in coal-mining areas, arising, for example, from demands by insurance companies for full and costly structural surveys before cover is offered. Thirdly, where insurance cover is to be continued in a sale, there are instances of very large premium increases, which can often abort a sale.

Let me tell my hon. Friend the result of trawls by constituents of mine, and others in Yorkshire, in their efforts to shop around for insurance cover. Churchill Insurance, Zurich Municipal, Ecclesiastical Insurance, Cornhill Direct, Prudential, General Accident. Avon Insurance, Norwich Union and Commercial Union have all stated in one way or another, categorically or more cautiously, that they would not be able to offer new insurance cover in the typical circumstances likely to arise in the Yorkshire mining area.

General Accident, for example, wrote: However, if a property has suffered from subsidence damage for which repairs either have, or have not been carried out, proposers are advised to remain with their existing insurers.… If the subsidence problem is on-going it is less likely that we will be able to accommodate the business Prudential wrote: Any building which is to be insured by Prudential must be in a good state of repair before it can be accepted. We would not be prepared to accept a building damaged by coal mining subsidence that had not been repaired as the property would be susceptible to damage from other causes. Britannic Assurance wrote: We would not be willing to accept as new business a property which is currently showing signs of structural problems or is adjoining a property that has recently suffered such damage. When, in late 1995, I wrote to my hon. Friend the Under-Secretary of State for Trade and Industry about the problem, he actively entered the lists to see whether something could be done to improve matters. He constructively called a ministerial meeting with the relevant officers of the Association of British Insurers—ABI—and after that meeting, early in 1996, he wrote to me expressing the view that the essential difficulty was the information gap which can sometimes exist between insurance companies' head offices and local branches; and between insurance companies and brokers. Some brokers and local branches appear not to be sufficiently aware of the distinction between coal mining subsidence, where there is a statutory compensation scheme, and other types of subsidence where there is not. Turning to the situation of your constituent, I would suggest that she tries to contact insurance companies' head offices rather than brokers. Should she experience difficulties with the first contact point in any particular company or companies, she should, as suggested previously, enlist the help of the ABI in getting her through to more senior staff. My constituents followed the advice given by my hon. Friend, but I am sorry to say that it has not helped. Approaches to head offices proved as abortive as approaches to local agents. Indeed, one of my constituents had a letter from a senior officer of the 570 ABI, who recommended that she approach a body which had links with the ABI and had been designated as a troubleshooter in the present context.

The body concerned had a most promising title: it was called the Subsidence Claims Advisory Bureau, and it referred in its prospectus to an insurance scheme known as Coal Sure Household Insurance, with a mouth-watering subtitle that read: At last a chance to obtain full Building Insurance cover on property that has previously suffered from mining subsidence. My constituents thought, on receiving that advice from the ABI, which directed them to that specialist advisory bureau, that they had at last run their quarry to earth, as it were. They immediately got in touch with the firm of brokers, Messrs. G. W. Bishop Ltd., of Ashford, Kent, which was associated with the Coal Sure scheme. One can imagine their surprise and dismay, however, when they received a letter from Bishop Ltd. stating, in respect of properties that have suffered coal-mining subsidence: Cover for properties which have suffered from this type of damage is very difficult to obtain. In our experience, no company will offer subsidence cover for a property which has previously suffered any kind of movement. Those exchanges clearly showed, and currently show, that departmental optimism in the Department of Trade and Industry, and sanguine and soothing advice from the ABI, have all foundered on the hard rock of resistance by the great mass of insurance companies to take on new household insurance business in active coal-mining areas.

Such immovable resistance led me to write to the subsidence adviser, Mr. Webb, at the end of last summer. I received from him a letter that included the following passage: From the general response which I have received from the ABI, it is clear that the specific reply given by Churchill to (your constituent) is in accordance with the criteria which are being applied by the whole insurance industry. Those criteria are:—

1) Companies are not prepared to insure subsidence damaged properties as new business: and.
2) existing insurers will continue cover on subsidence damaged property, and this extends to new owners where the property changes hands, provided that cover has not been allowed to lapse."

The subsidence adviser rightly went on to describe the situation as "far from satisfactory."

I hope that my hon. Friend will agree that the situation is far from satisfactory. My constituents in North Yorkshire—and possibly others elsewhere—are suffering real detriment from the current state of affairs. One of my constituents, for example, who is paying an annual premium of £427 on her property in Selby to Royal Insurance, had an offer from General Accident for identical cover for £263. The offer from General Accident was withdrawn immediately, however, when my constituent disclosed that her house was in an active coal-mining area, and had suffered subsidence damage.

I think that my hon. Friend will be as surprised as I am by the negative approach that the insurance industry has adopted towards subsidence problems, precisely because the Government have an excellent record in underwriting damage with public funds. There is no rationale in the insurance industry jibbing at providing underwriting cover for properties in coal mining areas, 571 as the Coal Mining Subsidence Act 1991 provides effective statutory cover for dealing with subsidence claims and disburses millions of pounds a year—as I have already said—to take the heat and burden of compensation on to the broad shoulders of public finance and away from private insurance. Why, then, this irrational discrimination?

I hope that my hon. Friend will seek further remedies. I hope that, as result of this short debate, he will hold further discussions with the Association of British Insurers with a view to ending the discrimination that I have specified. One way forward might be for the Minister to encourage the insurance industry deliberately to exclude coal mining subsidence damage from policies, on the grounds that publicly financed compensation is already available. Lower premiums and more active policy writing could then result.

If all else fails, I hope that my hon. Friend will consider paying compensation, as part of statutory subsidence compensation, to householders who can demonstrate that they are suffering financial detriment through not being able to secure new and cheaper insurance cover. I hope that he will consider offering financial help in cases where the insurance industry will consider offering a quotation for new insurance cover only if a very costly full household structural survey is provided. I need not remind my hon. Friend that such surveys can cost many hundreds of pounds.

The Minister for Competition and Consumer Affairs (Mr. John M. Taylor)

I congratulate my right hon. Friend the Member for Selby (Mr. Alison) on securing this debate. I welcome the opportunity it provides to discuss the issue of insurance cover for properties in areas exposed to the risk of coal mining subsidence damage. As he said, it is an issue that potentially affects large numbers of homes in his constituency and elsewhere.

I am aware that my right hon. Friend has had previous correspondence and discussions on this matter with my hon. Friend the Minister for Small Business, Industry and Energy. I am therefore aware of the difficulties faced by some of his constituents while trying to obtain insurance cover for their homes. My right hon. Friend drew attention to the extensive safeguards provided by the statutory coal mining subsidence regime.

The relevant legislation is the Coal Mining Subsidence Act 1991, as amended by the Coal Industry Act 1994. In essence, the Act requires coal mining companies in areas of current mining and the Coal Authority elsewhere to make good coal mining subsidence damage. Given that statutory regime, like my right hon. Friend I find it difficult to understand why insurers should be concerned about the possibility of receiving claims for coal mining subsidence damage when that damage would be made good by the coal mining company or the Coal Authority.

572 My right hon. Friend was kind enough to refer to my hon. Friend's initiative in meeting the Association of British Insurers, when he put that proposition to them. It was clear that there was widespread—if not universal—recognition, at least in the association and at insurers' head office level, that the regime was in place and that the cost of coal mining subsidence damage repairs would not fall on the insurer.

Nevertheless, the association offered—I believe it was a helpful suggestion—to hold a seminar for its members with the Coal Authority and with RJB Mining to make clear the full extent of the coal mining subsidence damage regime and its implications for insurers. That seminar was held in October last year and was well attended. I am sure that the insurance industry, certainly at head office level, is now much more fully aware of how unlikely it is that it would be called upon to meet coal mining subsidence damage claims. That appears to be useful progress.

Meanwhile, my right hon. Friend recently received a letter from the Association of British Insurers. He will know from the letter that the association accepts that some insurers had been reluctant to quote for risks in coal mining areas because they failed to understand the responsibilities of the mining companies and the Coal Authority. My right hon. Friend will have noted that, in order to improve the situation, the association has requested the chief executives of member companies to ensure consistent application of an informed underwriting policy of generally being prepared to insure such policies". I turn now to the so-called "direct" insurance market. As my right hon. Friend is aware, those companies offer lower premiums. They are able to do that, essentially, by taking on only applications that give rise to no substantial underwriting complications, thereby enabling them to reduce their administration costs. Insurers are commercial undertakings. I am confident that my right hon. Friend will agree that, if some insurers decide that they shall seek to supply a particular segment of the market in that way, they are fully entitled to do so.

Much of the continuing confusion about the matter is due to a lack of understanding of company underwriting policy at branch level. While the head office of a particular company may be well informed of the risks and of how customers should be advised, staff at branch level often remain uninformed. A similar situation can arise with independent brokers, where companies have not kept them up to date with any changes to their underwriting policies.

The Association of British Insurers has been positive in contacting its members to ask that each company ensures that its underwriting practices are consistent across its regional offices. The association highlighted the need for companies to put in place procedures for referring customers from direct writing arms of their business to other parts of the company that can handle that specialised business.

I understand that steps are being taken to compile an information pack to ensure that all direct insurers give consistent advice about why they have to refuse some applicants, and that they pass applicants on to "non-direct" parts of the business, which will consider more complex applications. A pack is also being 573 considered that would explain to customers the limits of different types of insurance, and point them towards the kind that is most appropriate for them.

I hope that my right hon. Friend will agree that some progress has been made by the Association of British Insurers and the insurance industry. However, it is quite clear that some work remains to be done. The association will be seeking information from its members on what action companies have taken, and it will report that progress to my hon. Friend the Minister for Small Business. Industry and Energy.

574 I also give my right hon. Friend this assurance: when Hansard has completed its task, my hon. Friend the Energy Minister will ensure that the director general of the Association of British Insurers receives the details of this debate, and he will ask the director general for his comments about the issues that have been raised. Naturally, my hon. Friend will then pass on those comments to my right hon. Friend