HL Deb 21 July 1915 vol 19 cc563-76

My Lords, I rise to ask the Lord President whether he can give any information as to the terms and conditions of the Government insurance scheme for dealing with damage to property which may result from bombardments or air raids. Since I put this Question on the Paper the other day the Report of the Aircraft Insurance Committee has been issued, and I notice at the outset that the terms of reference to the Committee which has brought forward the present scheme state that "Any scheme prepared must be on the basis of reasonable contribution being paid by the owners of property insured towards the cost of insurance." In view of the experience that has been gained in a way which I shall mention in a moment, I think that the proposed contributions are most unreasonable.

Perhaps I might explain why it is that I intervene in a matter of this kind. Seven months ago an Air Raid Committee was formed of which I had the honour to be chairman, and in which my associates were Mr. Ram, who has had great experience and is the foremost exponent in insurance matters at this time in England, and Mr. Robert Lewis, of the Alliance Insurance Company. We dealt with on the whole something like 10,000 cases in round numbers, and I may say, with I hope becoming modesty, that we had a unique experience of what would probably be a reasonable basis for an insurance scheme. In fact, I may go further and say that we had the only experience which could forma sound basis for developing an insurance scheme under these conditions. Having an immense amount of statistics on this point, we proposed to the Treasury that we should put them at the disposal of the Government in order that a national insurance scheme on a business basis should be formulated, and we had a courteous letter in reply to this effect— The Board of Trade are at present considering a scheme for State insurance against air risks, with the assistance of insurance experts. I have expressed to Sir George Barnes, of the Board of Trade, who has the matter in hand, the kind offer of your Committee to assist, and have suggested to him that he should consult you— That is, the Committee, although the letter was addressed to me personally— on whatever stage of the proceedings may seem most convenient. Well, we have never been consulted from beginning to end, nor have we heard a word from the Board of Trade.

Your Lordships should not consider that this is in any respect a personal matter so far as the Committee are concerned. We are indifferent in that respect. But it surely is a very serious matter, when the Government are going to bring forward for the first time a national scheme of insurance in reference to new conditions and a Committee has been dealing with those very conditions for the last seven months and has made an offer to place their experience at the disposal of the Board of Trade, that not a single answer of any kind or sort should be given to them by that Department, and that a scheme should be developed without any reference whatever to the Committee's experience and knowledge. It is not difficult to see that in the circumstances a merely theoretical scheme may be entirely out of accord with the experience which we have gained on a practical basis. And I am bound to say that the scheme as formulated is so unjust and so unfair as regards the experience which we have in fact obtained in a large number of cases that I propose for a few moments to address your Lordships upon that topic.

I want to say at the outset that the Committee of which I am a member are not against an insurance scheme; on the contrary, we not only indicated that we thought an insurance scheme would be the proper way of dealing with the difficulty, but we offered to place at the disposal of the Board of Trade all our facts and statistics. We did so for this reason, that from the outset, although the matter was left in our discretion, we dealt with compensation on the insurance basis in order that if an insurance scheme were subsequently developed our experience might be of use in formulating it. I know it is the current and normal experience of bodies such as that of which I had the honour to be chairman to be regarded without much weight by officials. I make no complaint upon that. But may not that be one of the causes of the chaos and extravagance which is now going to result? It is well known that at the commencement of the war period a large number of Committees were instituted, and I trust that all the Committees have not been treated in the same way as we have been as regards the information we have accumulated.

Let me criticise, not unduly I hope, the proposals contained in the Report of the Aircraft Insurance Committee as compared with our experience. The first matter in this Report is that— In consideration of the companies placing their staffs at the disposal of the Government, we recommend that a remuneration of 10 per cent. on the gross premiums should be paid to the companies … At a later stage in addition to that there is a per cent. for agency purposes, so that the companies will get 15 per cent. on gross premiums. Now, what is our experience, because we have had ample experience upon this point? We have had to deal with claims of over £100,000—I mean that it is an experience over a wide margin; and our experience is that so far from the cost being 15 per cent., plus whatever the cost may be of a new State Insurance Office, ours has been just one-third percent. In other words, the cost proposed in this scheme is forty-five times the cost according to the experience we have gained during the last seven months. These figures were open to anybody, of course. They were part of the figures we wished the Board of Trade to have. I am not sure whether the Duke of Devonshire is going to answer me, but I want to know the basis on which this percentage was fixed, because it appears to be most extravagant. This is how you get loss; this is how you really do get extravagance. In addition, there is to be the expense of a State Insurance Office. The expenses which we incurred, as I have said, were only one-third per cent., and that represented the whole expense of every sort and kind incurred by us subject only to what are known as assessors' fees; and I may point out that assessors' fees are not in any way covered by the percentages mentioned in this Report. I think we have been very moderate in our assessors' fees, and I should here like to express my gratitude for the splendid work which the assessors did, because although we dealt with something like 10,000 cases the number of complaints has been infinitesimal, although, of course, you cannot satisfy everybody in a scheme of that kind.

There is another important matter as regards the question of valuation. The proposal here is that in certain cases you should not admit what is known as the average clause. There is already fire insurance without it. That is all very well for insurance companies, but it is the most extravagant system you could possibly have. I dare say the noble Duke, when he comes to answer the question, will be able to explain how that is going to be dealt with. Then I notice that on page 6 of the Report it is stated that the amount likely to be received in premiums "may be expected to cover the cost of sporadic raids of the kind already experienced." We were the only body with any knowledge of what the cost of sporadic raids was, having regard to the nature of the property affected. I want to know where this Committee ascertained the cost of sporadic raids. The only body who had the information was not consulted in any way. Had we been consulted we could have pointed out what has been a very essential factor of our inquiry—that so far as aircraft are concerned, the amount of damage has been comparatively small; whereas under the head of "bombardment," which I hope may not occur again, there was a large number of cases of most serious damage.

I now turn to the schedule of rates, because it is this schedule that appears to me to be an absolutely absurd burden, according to our experience, upon the householder, or the person in occupation of premises, or as regards stock. I know, of course, that we are dealing with this on the flat-rate principle. I think myself that probably the fiat-rate principle is right; I am not finding any fault with that. The first is buildings; the rate is 2s. against aircraft only, and 3s. against aircraft and bombardment. That is exactly cent. per cent. higher than according to our experience; it ought to have been 1s. and 1s. 6d. instead of 2s. and 3s. I am at a loss to understand how any such figure has been arrived at. I should like to know what the Committee had before them to lead them to fix such an extravagant figure, having regard to the real nature of the risk

Perhaps more extraordinary still is item No. 3, "Farming Stocks (live and dead)"; the rates here are 3s. and 4s. 6d. respectively. In our opinion 1d. or 2d. would be ample; and I will explain why that is. To begin with, the country districts are not aimed at, and the damage done there is only by accident. What the raids aim at are the industrial centres, and particularly those where munition works are being carried on. In a case which came before my Committee where a bomb had been dropped amongst crops, there had been no damage that exceeded 3s., 4s., or 5s.—nothing but the cost of filling in the hole. Again, in no case has the crop itself been damaged. Then with regard to the farmer's stock, he has not his whole stock in one place, as in the case of munitions. We have had a large number of farmers' claims, and the whole of them have been settled at a really nominal figure. It is really out of all proportion to suggest such a sum as 3s. and 4s. 6d. respectively on farming stocks, live and dead. In form, you suggest a Government insurance scheme; in fact, you impose such terms that no prudent man could touch it at all. That is a wide statement to make, but I make it from experience carefully gained over a period of seven months. It is not that I want to attack this principle of insurance; but I say this, that to disregard the experience gained in a case of this kind is just the basis from which we get the national extravagance and waste to which attention has been called. Then as to "Contents of all buildings other than those specified in Nos. 1 and 5." Here the rates are 5s. and 7s. respectively. I do not know where any such figures can possibly have come from. Lastly, as regards certain merchandise and so on the rate is 7s. 6d. and 10s. respectively. These figures are so extravagant in proportion to our experience that I can only say frankly that I cannot understand on what basis they have been fixed.

Then the Aircraft Insurance Committee say at the end of their Report, what is true, that if you were to have an insurance for less than the annual period probably you would have the most damage in the first months after insurance. I want to emphasise that. I think it is very likely that the period of most damage has already passed. We had both a bombardment and an attack from aircraft. Of course, one cannot say what the future is likely to be, but the experience gained, according to the Report of this Committee, was gained at the time when the cost was likely to be greatest. Do not let it be thought that I want to be dogmatic upon a difficult question. That is not the object with which I am addressing your Lordships at the present time. It is to point out a real criticism of the extravagant rates here proposed, but still more to say that it cannot be in accordance with national economy that when you have had a Committee sitting for seven mouths dealing with this very question and they offer all their experience to the Board of Trade—and we were referred to them by the Treasury—you should not make one single inquiry of that Committee or take any notice whatever of the experience they had gained. It is only an instance of the normal way in which officials deal with Committees of this kind. But it is extremely important that a custom of that sort should not be followed when an official body is seeking to formulate a new insurance scheme, and when there is a Committee sitting which has all and the only experience at hand.

This insurance scheme does not deal with what has been the difficult and really the most important part of our inquiry—that is, injury to persons. Do the Government intend in future to exclude persons who have been compensated in the past by the Committee of which I have the honour to be chairman? Of course, our Committee will come to an end. We shall not have enough work to keep us going. That is naturally enough a matter of satisfaction, although we should have been glad to carry on our public duty. Next I want to ask the noble Duke whether the Government have had this in mind, that the immense mass of the claims brought before my Committee were very small claims with regard to poor cottage property, windows damaged, and so on. Our experience is that the tenants of property of that kind do not insure. They may be induced insure—I do not know — by the agents to whom the 5 per cent. (unnecessary commission, as I think) is going to be paid; but as a matter of fact they do not insure now. When we were dealing with large properties we found insurance, and of course where we found insurance did not suggest that any further payment should be made because the insurance covered the loss. But I want to ask the noble Duke what information or guarantee the Government have that the poorest class of property, which has been chiefly damaged and which has chiefly come before our Committee, is likely to come within the insurance scheme at all? That is just the class of property which naturally would not be insured and which requires the treatment it has received up to the present time.

I hope your Lordships will not think that the Committee—either myself or my colleagues—have the slightest personal feeling of any kind at our suggestions for information being scouted, as they were, by the Board of Trade. That is quite immaterial. But what I think is most material and a matter of the first importance is that unique information derived under conditions of this sort, carefully collected, which could not be got from any other source, ought to have been considered and due weight given to it before n scheme of Government insurance was floated. It goes really to the basis of economy on questions of this sort, and I dare say the noble Duke, will give some reason why no consultation of any kind was held, and why our offer was not even answered in ally form by the Board of Trade.


My Lords, I venture to hope that serious attention will be given to the important remarks which have just fallen from my noble and learned friend below me. His Committee, as your Lordships know, have dealt with this matter of damage by aircraft and bombardment so far as it has been dealt with up to the present time, and the system upon which they went and which has been acted upon tip to the present time by the Government is to pay for structural damage and not to include consequential damage or loss of profit to the trader. Well, you have left that, and, as the noble Lord has told you, the Board of Trade seem to have paid no further attention to the labours and experience of that Committee. The Government apparently have adopted another scheme; and my reason for rising is this, that no attention seems to have been paid to that matter in the House of Commons. This insurance scheme may be a very large thing, but so far as I am aware there has been no attention of any sort paid to it in the House of Commons. Mr. Runciman made a speech in which he referred to the fact of the Report of this Committee, and he said "This Committee has now formulated a scheme which the Government are prepared to adopt." He then proceeded to state certain portions of what the scheme was. He did not state the whole scheme; he did not say that the scheme had been adopted in its entirety; and as a matter of fact, as I shall show your Lordships, it leas not. He merely made this statement, and when it was finished Mr. C. E. Price, the Member for Edinburgh Central, asked whether the Prime Minister would give the House an opportunity of considering these terms, as he (Mr. Price) was quite sure that those connected with insurance thought that many of the terms were very absurd. And the Prime Minister replied, "I will consider that." The result of that was, so far as I have been able to ascertain, that nothing more was said about the matter in the House of Commons. And here it conies before your Lordships, and you have heard the terms in which the Report has been alluded to by my noble and learned friend whose Committee has had the only practical experience that there has been in this regard.

In what position is the matter at this time? Suppose, for instance, that to-day a house is destroyed by a bomb from aerial craft, what is the position? Until this scheme appeared the Government paid for the structural damage, but does the mere fact that this scheme has been announced—it has not been announced publicly; it was merely referred to, so far as I am aware, in this speech of Mr. Runciman—free the Government from any liability in respect of damage that is done to-day and hereafter? The Government, in their instructions to the Aircraft-Insurance Committee, said that— Any scheme prepared must be on the basis of reasonable contribution being paid by the owners of property insured towards the cost of insurance. This scheme, as I understand, requires that the whole charge shall be put upon the owners of property, and thereby it seems to me that the Government will be wholly exempt from liability of any kind.

In his speech Mr. Runciman read certain extracts from, but did not read the whole of, the Report of this Committee. He omitted one or two matters. I will give your Lordships an instance of what he left out. The Committee say— … it is not practicable to fix rates which would cover the State against loss in the event of raids by hostile aircraft resulting in a series of general conflagrations in congested areas. The possibility of any raid having such serious results is a matter on which we can form no opinion, and it is a risk which we think the State must be prepared to accept. The Government say they are prepared to accept this Report, but they have not stated anything as to whether they are prepared to accept liability in the case of a series of conflagrations arising from bombs. That is a very important matter for all persons who are insuring, and it is a matter on which we ought to be informed. Then with regard to the announcement of these terms. I asked just now whether the Government would, from the day on which this Report was referred to, hold themselves free from all liability. The Committee say in paragraph 41— If the Government decide to establish an insurance scheme on the lines which we recommend, we presume that a public announcement will be made to the effect that the Government will not accept any liability in the future for loss or damage by the perils insured against under this scheme unless the property is insured under this scheme. I have not seen any public announcement of that kind. Surely it is absolutely imperative, if a liability is to be thrown upon the owner, that an announcement should be inserted in the newspapers so that everyone may see it.

Then with regard to the cost of this State insurance body. Perhaps the noble Duke will be able to tell us exactly what it is proposed to do in that way, because it seems to me that the business will be done two or three times over, as it is said that it will be necessary to establish in London a State Office at which insurance can be effected; this will be under the control of a Committee of experts, and so on. What I want to know is, Are we to have another public body? We are first of all to work through the insurance offices, but are we in addition to have a public body? And will any official in the Department be paid? Really the amount of information which the country has with regard to this matter is so small and so fragmentary that it is imperative that we should obtain some additional information from the Government. I must say that so far as I have been able to calculate the matter, we should have done much better had we gone on working through Lord Parmoor's Committee and on the principles which they observed. There is one other question I should like to ask. Under what authority is this scheme set up? Have the Treasury or the Board of Trade power to issue schemes of this sort merely administratively, and to put them into force without any reference to Parliament?


My Lords, as I drew the attention of the House a few weeks ago to the great anxiety that was felt in the City of London with regard to this question of damage by aircraft and bombardment, I think I ought to say a few words. I did not know until I reached the House this afternoon what the form of Lord Parmoor's criticisms would be. However, I may say that there is great satisfaction in the City on the part of merchants at having their anxiety relieved by the knowledge that a System of State insurance is being set up, but at the same time regret has been expressed that there has been no Parliamentary criticism of that scheme. Lord Camperdown has asked the Government upon what authority such a scheme as this could be put into operation without any criticism of any sort or kind. I might say that at the London Chamber of Commerce, of which I am President, a committee has been sitting for some time in connection with this matter, and we were given information as to the nature of this scheme. We sent in our criticisms, but the scheme had already been adopted and therefore none of the criticisms of the City of London were considered.

There was great anxiety amongst brokers, merchants, and bankers in the City with regard to large and valuable accumulations and so forth in docks and warehouses. The bankers asked for insurance receipts; they could not be produced; and where advances had been made repayment in some cases was asked for. That gave cause for anxiety, and relief was felt that a scheme of insurance of some sort had been adopted. But I should like to ask whether the rates are definitely fixed, or whether anybody will have the power to say that the rates ought to be half the amounts proposed. The London Chamber of Commerce, in one of their criticisms, said they considered certain of the rates in the schedule at least double as much as they ought to be.

The noble and learned Lord opposite referred to the great cost which will be incurred. That comes hack to the suggestion which I made a little while ago in this House that this should not be a personal but a national liability. There are certain expenses that will by far exceed anything that is justified with regard to any damage likely to be incurred. The plan adopted by Lord Parmoor's Committee was one that seemed to give general satisfaction, and he has told us this afternoon at what a small cost it was done. Of course, there are those who say that the State cannot take upon itself all these liabilities. But, after all, is this a personal liability when we have paid our taxes for the Army and Navy to protect our lives and property. Is not the risk from bombardment and aircraft so small that the State could afford to take over this liability and treat any expense incurred it the same way as if an ironclad is sent to the bottom—namely, as a national loss?

We ought to have been allowed to criticise this scheme in some way, and certainly should have known that all the suggestions and criticisms made had been considered. My noble friend, Lord Devonport, who is Chairman of the Port of London Authority, knows far better than I do the risks and expenses and that sort of thing that great bodies such as his are incurring with regard to this matter. I am afraid this serious matter has been treated far too lightly. I think I gathered from the noble and learned Lord just now that there will be a great number of people who even under this scheme will not insure. We shall find, I think, that that will be the very property, which will be destroyed, and then there will be public sympathy, and the State will have to pay. And the last state will be worse than the first. The insurance companies know how difficult and complicated the matter is, and they could not frame what the premiums should be; and now they are only acting as agents of the Government, and are not taking the risks on their own account. I am sorry I was unaware of the form of the criticism which my noble and learned friend was going to make this afternoon; otherwise I would have come prepared to make a speech which would have been a more useful addition to the debate. But I felt it my duty to rise and say that, although our anxiety in the City has been considerably relieved in regard to this matter, we are certainly sorry that there has been no opportunity of criticising the Government's scheme.


My Lords, I am afraid that in the position in which I find myself this afternoon I shall not be able to say very much to satisfy the critics of the Government. My noble friend behind me (Lord Southwark) said that in the City they regretted the absence of criticism of the scheme, but the absence of Parliamentary criticism has not prevented some forcible observations being made on the subject. Your Lordships will probably be aware of the history of this scheme. The scheme was described in the House of Commons by my right hon. friend the President of the Board of Trade on July 13. He stated then that a Committee had been formed, a Committee which held a very high position especially in regard to matters connected with insurance, and which I have every reason to believe gave confidence to those experienced in this business. That Committee reported, and their Report is now in your Lordships' hands. The Government decided to adopt that Report in its entirety. The scheme, which is the scheme of the Government, is that which has been suggested by the Committee, and that scheme was, I understand, put into operation on Monday last; and a considerable amount of business has already been transacted.

As to one criticism by Lord Camperdown it is rather an unusual position for me to be able to make any reference to a subject which has escaped his vigilance. But in The Times of Monday last there was, under the heading "State Air Risk Insurance: Government Warning," a statement that the Government scheme of insurance against aircraft and bombardment risks came into operation that day, and that the Board of Trade had announced that— Now that a public scheme has been established no liability can be accepted by the Government and no claim can be entertained in respect of damage to property by aircraft or bombardment unless the property has been insured under the scheme. That is in the identical language of the seventh of the specific recommendations of the Committee, to be found in paragraph 42 of their Report, that— The Government should announce that after the establishment of the scheme they will not indemnity any person for loss … unless the property concerned is insured under the Government scheme.


Has the scheme been adopted in its entirety?


I understand that the scheme as recommended by the Committee is adopted in its entirety. I hope I can assure my noble and learned friend Lord Parmoor that no discourtesy to him or his Committee was intended by the Board of Trade. The Board of Trade are most grateful for the work done by them in this connection, and I understand that the letter which the noble and learned Lord wrote was referred to the Aircraft Insurance Committee. Lord Parmoor has sufficient experience of Committees to know that they are not always willing to receive suggestions, even from the people who bring them into existence; but there was no intention of being discourteous to my noble and learned friend.


There is no question as regards discourtesy. I should not bring such a matter as that forward. The point is that information was offered from the only body which had experience, and no notice whatever was taken of it.


My right hon. friend the President of the Board of Trade was in the position of having to judge between a variety of counsellors; and after due deliberation he decided to adopt the recommendations of the Aircraft Insurance Committee which he had appointed, and their scheme has now come into operation. Power is taken by the Government—your Lordships will find this in the second paragraph of Schedule III of the Report—to vary the rates from time to time if it is necessary to do so. I am afraid I am unable to reassure critics this afternoon beyond saying that I shall most certainly see that what has passed in this debate is conveyed to my right hon. friend the President of the Board of Trade. Not only those criticisms but any further criticisms which experience may produce, in the light of actual operation of the scheme, will be brought to his attention and will undoubtedly receive his most complete investigation and consideration. This scheme is already in operation, and the suggestion which I respectfully make is that it be given a fair trial to see how it works; and if at a later period, when we have had further opportunity of judging its merits, suggestions should be addressed to the Government either in this or in the other House, I can give the assurance that they will receive every consideration.


I was under the impression that official notifications by the Government were inserted in the London Gazette. The noble Duke alluded to a statement which had appeared in The Times. I do not know whether the ordinary process is going to be abandoned, but I should have hoped that some kind of notice in the London Gazette could be given.


understand that the usual steps were taken to make the notice as public as possible. But I will inquire into the point raised by the noble Lord.