INDUSTRIAL ASSURANCE BILL. [H.L.] (Hansard, 10 August 1921)

THE PARLIAMENTARY SECRETARY OF THE MINISTRY OF HEALTH (THE EARL OF ONSLOW)

My Lords, your Lordships will remember that shortly before Easter the noble Lord on the cross-benches (Lord Sydenham) raised this question, and asked me whether the Government intended to take any action in the matter. I replied that it was the intention of the Government to introduce a Bill during the present session, and this measure is the fulfilment of the undertaking I gave on that occasion. Your Lordships will readily understand that at this late period of the session it is impossible to carry the Bill through all its stages, either in your Lordships' House or in another place. The matter is an exceedingly complicated one, and the object of introducing the Bill to-day to your Lordships is to enable all those persons concerned to know what the proposals of the Government are for meeting the strong demand which has been made for legislation on this subject. It also affords the Government an opportunity of knowing upon what points criticism is to be chiefly directed. By this means the legislation, which it is proposed to undertake in the next session, will be greatly facilitated, because the Government will then have the advantage of being able to consider carefully the criticism that may have been levelled at this Bill.

Turning to the Bill itself, I may say that the greater part of it consists either of consolidating provisions, or of provisions for the protection of policy holders, and to these provisions it is believed that the agreement of the companies and societies will be readily obtained. The Bill, as your. Lordships no doubt see, has been founded on the Report of the Departmental Committee which was presided over by the noble and learned Lord, Lord Parmoor. I think the Bill practically carries out the whole of the recommendations of that Committee, though in one or two points there are differences between the Bill and the Report. In the main, however, the same ends are arrived at. I do not think I need draw your Lordships' attention to the provisions of the Report, which is on the Table of your Lordships' House. Those 401 provisions have already been discussed here.

I will, therefore, pass to the main points of the Bill, and indicate them briefly. Clause 1 provides a simplified definition by which industrial assurance is made to include all policies on which premiums are received by means of collectors at intervals of less than two months. As the law stands at present a society which confines its collecting operations within a radius of ten miles from its registered office is exempt from the statutory provisions applied to industrial assurance. This system has proved unsatisfactory in practice, especially in recent years, and we propose now to apply the same law to all organisations carrying on the same class of business irrespective of geographical limits.

Then I come to Clause 2, by which the Chief Registrar of Friendly Societies, who, as your Lordships know, already supervises collecting societies, will be charged with the supervision of the whole system of industrial assurance. So far as the companies are concerned, this supervision will take the place of the present system of receiving returns by the Board of Trade. An effective supervision will be substituted for what is now a. little more than a matter of recording. Clause 4 is founded on paragraph 42 of the Committee's Report. It departs a. little from the recommendation, but it is devised to meet the same ends. The clause is designed to limit the expenses of management and the dividends of shareholders, and to secure that the savings go to the holders of policies.

With regard to Clause 7, that clause extends to collecting societies the provisions of the Assurance Companies Act and compels them to make a deposit of £20,000, but the provision is limited by subsection (4) of the clause which exempts societies with a membership under 75,000 who continue to collect entirely within the old ten-mile limit.. Clause 11 amends the Assurance Companies Act of 1909, and makes industrial assurance a separate class of business for which a separate deposit is required. With regard to Clause 18, your Lordships will remember that the committee drew attention in its Report to the varying conditions on which different societies based their valuations. This clause is designed to secure greater uniformity in those valuations and also to secure compliance with certain essential conditions of sound valuation.

402 Turning to Clause 20, I would venture to draw your Lordships' special attention to subsection (3). This provision lays down that any person employed by a company who fills in a proposal form must be assumed to act as an agent of the company, and not as the agent of the person making the proposal for insurance. Paragraph (2) of subsection (3) also lays down limits within which the company may challenge the validity of the policy. Then I come to Clause 24, which deals with the lapse of policies. Under this clause, any policy which lapses after the time specified in that clause, will entitle the policy-holder either to a free paid-up policy or, in certain cases, to a surrender value. Clause 27 makes it impossible to deduct from a claim arrears on other policies. To give an illustration, if a sum is to be paid on the death of a policy-holder, it will not -be possible to deduct from that lump sum any of the arrears due on policies of other members of the family.

Next I turn to a clause which, as your Lordships remember, has been much discussed—namely, the clause dealing with war bowl policies. This clause gives effect to the recommendation made by Lord Parmoor's Committee, and enables the controlling authority to revise; the terms of war bond policies in cases where they may possibly have been considered inequitable. With regard to Clause 34, I would remind your Lordships that the Report of the Parmoor Committee contained a long discussion of the activities of a gentleman called the "special canvasser." The Committee, as your Lordships will remember, thought that many of those activities were undesirable, and this clause gives effect to their recommendation. In future, the action of a special canvasser will be impossible, and his functions will be abolished under this clause.

There is only one other clause with which I think I need trouble your Lordships, and that is Clause 42. It was not a matter which was dealt with by the Departmental Committee's Report. It deals with bond investment business. The clause is introduced to control certain classes of loan companies which, owing to the wording of the Act of 1909, are not subject to the provisions of that Act. The clause introduces no new principle, but merely amends and extends the Act of 1909.

I do not wish to detain your Lordship at this late hour with further discussion 403 of the Bill. I have dealt with the outstanding features of it. There are, of course, many other points of detail, all of which follow the line laid down by the Report of the Committee. I merely add, in moving the Second Reading of the Bill, that I should like again to express the hope that it may receive the consideration and criticism of those who are interested therein between now and next session, so that when the Government introduce the Bill again, they may be in possession of the view of those who are interested in this subject. I beg to move.

§ LORD SYDENHAM

My Lords, I should like to express my gratitude to the Government and the noble Earl for bringing forward this Bill and giving us time for it next session. I have twice attempted to draw the attention of your Lordships' House to the very grave revelations which were made by Lord Parmoor's Committee, to which evils this Bill is intended to put to an end. In framing the Bill, the Government, doubtless, have taken opinions from a very large number of quarters, but they could not ascertain. I am afraid, the opinions of the vast number of persons who have suffered total loss from the operations of this system of industrial assurance. The Committee stated that five million of these policies lapsed in one year, and it was maintained in evidence that this large number of lapses was really disadvantageous to the companies, but the Committee was able to prove that these enormous losses to the very poor people were compatible with large gains to a few great corporations. I believe in the case of some of these lapses the provisions of the Courts (Emergency Powers) Act, 1914, have been violated. In one case, of which I know, a father and three sons served in the Army, having taken out an industrial policy. When they came back after demobilisation, they offered their arrears, but those arrears were refused, and now, in these had times, those poor men cannot, of course, pay up all that they owe, and they have lost every farthing that was collected from them.

In a case which was given to me this afternoon, a man makes a signed statement to the following effect, and I think it is a very startling case— 404 I, William Robinson, sincerely and solemnly declare that in the month of August, 1920, two men representing the Prudential Assurance Company, Ltd., called upon me and induced me to pay to them the sum of £1 as a first instalment, on what I was led to believe was the purchase of £100 of War Stock, which I was given to understand would be payable to me with interest thereon at the end of eight years; and which amount would by that time amount to between £130 and £140. As a consequence of what they told me I have paid nine instalments, or £9 altogether. I now find that I have been grossly misled, and that instead of War Stock I have an industrial assurance policy with conditions attached that I knew nothing about. Had I been told the truth I most certainly should not have paid any money to these men or to the company on such a contract, and I suggest it is more than time the public were protected against such fraudulent transactions, and I further consider that the £9 paid should be returned to me with interest thereon. I have here the book of this man on which is stamped "5 per cent. War Stock £100," but there is not a word in it to indicate that it had anything to do with an insurance policy of any kind. There must be thousands of cases of this kind, showing how very necessary this Bill has become.

Clauses 23 and 24 deal with question of lapses, but they do not seem to have any retrospective effect, which I am inclined to think is necessary. The real remedy is to insist in most cases upon equitable surrender values. The case of the so-called War Bond policies is really peculiarly scandalous. These policies, which, as I have explained to the House, are grossly unfair to the holders, were eagerly pressed upon very ignorant people, who were led to believe that they were rendering patriotic service by accepting terms at which no business man would look. The noble Viscount, who then represented the Board of Trade, said that he knew nothing about this system, and believed that it had ceased to exist. But at that time it was in full operation, and about 700,000 of these policies have been already lapsed by the Prudential Company, which must have been disastrous to a large number of holders. I am glad to see that Clause 30 deals with this system, and gives power to the Inspector-General to remedy grievances, though it is not retrospective. I am inclined to hope that it will be made retrospective. One of the most important clauses is Clause 21, which requires that a prescribed form of policy shall be used. It will require a little amendment to make it effective, but it gives considerable means of remedying some of the worst evils of this system.

405 The Report of Lord Parmoor's Committee really made some action quite inevitable, because the system it described could not possibly be allowed to continue much longer in such a country as ours. It has been to me a source of pained surprise that so little was done to give publicity to the revelations in that important Report, or proclaim the cruel hardships which the system is causing on a large scale. The newspapers have hardly touched the question at all. The Labour Party, which affects to champion the grievances of the manual workers, has not found time to deal with their greatest grievance. In their multifarious conferences and discussions, which range over many questions, this burning question has never been brought to the front. It will rest with your Lordships' House, which has always shown sympathy with the working classes, to amend this Bill, if necessary, so as to prevent for ever the profitable exploitation of the meritorious thrift of poor people. I welcome the Bill as a real attempt to put a stop to a national scandal, and I earnestly hope that the Government, when there has been time to consider all its provisions, will be willing to accept any Amendments which can be shown to be needed to render it permanently and completely effective.