HL Deb 27 July 1967 vol 285 cc1237-46

[No. 132]

After Clause 48, insert the following new clause—

Classes of insurance business relevant for purposes of Part II, and definitions thereof

(".—(1) The classes of insurance business relevant for the purposes of this Part of this Act are industrial assurance business, liability insurance business, marine, aviation and transport insurance business, motor vehicle insurance business, ordinary long-term insurance business, pecuniary loss insurance business, personal accident insurance business and property insurance business.

(2) In this Part of this Act, "industrial assurance business" has the meaning assigned to it by section 1(2) of the Industrial Assurance Act 1923.

(3) In this Part of this Act, "liability insurance business" means the business of effecting and carrying out contracts of insurance against risks of the persons insured incurring liabilities to third parties, not being risks arising out of, or in connection with the use of, motor vehicles or out of, or in connection with the use of, vessels or aircraft or risks incidental to the construction, repair or docking of vessels or aircraft.

(4) In this Part of this Act, "marine, aviation and transport insurance business" means the business of effecting and carrying out contracts of insurance—

  1. (a) upon vessels or aircraft, or upon the machinery, tackle, furniture or equipment of vessels or aircraft:
  2. (b) upon goods, merchandise or property of any description whatever on board of vessels or aircraft:
  3. (c) upon the freight of, or any other interest in or relating to, vessels or aircraft;
  4. (d) against damage arising out of, or in connection with, the use of vessels or aircraft, including third party risks;
  5. (e) against risks incidental to the construction, repair or docking of vessels, including third party risks;
  6. (f) against transit risks (whether the transit is by sea, inland water, land or air, or partly one and partly another), including risks incidental to the transit insured from the commencement of the transit to the ultimate destination covered by the insurance; or
  7. (g) against any other risks insurance against which is customarily undertaken in conjunction with, or as incidental to, the undertaking of such business as falls within this definition by virtue of any of the foregoing paragraphs.

(5) In this Part of this Act, "motor vehicle insurance business" means the business of effecting and carrying out contracts of insurance against loss of, or damage to, or arising out of or in connection with the use of, motor vehicles, inclusive of third party risks but exclusive of transit risks.

(6) In this Part of this Act, "ordinary long-term insurance business" means business of any of the following kinds, namely,—

  1. (a) effecting and carrying out contracts of insurance on human life or contracts to pay annuities on human life;
  2. (b) effecting and carrying out contracts of insurance against risks of the persons insured sustaining injury as the result of an accident or of an accident of a specified class or dying as the result of an accident or of an accident of a specified class or becoming incapacitated in consequence of disease or of a specified class, being contracts that are expressed to be in effect for a period of not less than five years or without limit of time and either are not expressed to be terminable by the insurer before the expiration of five years from the taking effect thereof or are expressed to be so terminable before the expiration of that period only in special circumstances therein mentioned; and
  3. (c) effecting and carrying out contracts of insurance, whether effected by the issue of policies, bonds or endowment certificates or otherwise, whereby, in return for one or more premiums paid to the insurer, a sum or a series of sums is to become payable to the insured in the future, not being such contracts as fall within either of the foregoing paragraphs;
but does not include industrial assurance business.

(7) In this Part of this Act, "pecuniary loss insurance business" means the business of effecting and carrying out contracts of insurance against any of the following risks, namely,—

  1. (a) risks of loss to the persons insured arising from the insolvency of debtors of theirs or from the failure (otherwise than through insolvency) of debtors of theirs to pay their debts when due;
  2. (b) risks of loss to the persons insured arising from their having to perform contracts of guarantee entered into by them;
  3. (c) risks of loss to the persons insured attributable to interruptions of the carrying on of businesses carried on by them or to reductions of the scope of businesses so carried on:
  4. (d) risks of loss to the persons insured attributable to their incurring unforeseen expense; and
  5. (e) risks neither falling within any of the foregoing paragraphs nor being of a kind such that the carrying on of the business of effecting and carrying out contracts of insurance against them constitutes the carrying on of insurance business of some other class.

(8) In this Part of this Act, "personal accident insurance business" means the business of effecting and carrying out contracts of insurance against risks of the persons insured sustaining injury as the result of an accident or of an accident of a specified class or dying as the result of an accident or of an accident of a specified class or becoming incapacitated in consequence of disease or of disease of a specified class, not being contracts falling within subsection (6)(b) above.

(9) In this Part of this Act, "property insurance business" means the business of effecting and carrying out contracts of insurance against risks of loss of, or damage to, material property, not being risks of a kind such that the business of effecting and carrying out contracts of insurance against them constitutes marine, aviation and transport insurance business or motor insurance business.")

5.10 p.m.

LORD WALSTON

My Lords, I beg to move that this House doth agree with the Commons in Amendment No. 132, and with it I think it would be convenient, although it is rather a mouthful, to speak to some 55 other Amendments. They are Nos. 132 to 137 inclusive, 139, 140, 141, 143, 152 to 156 inclusive, 158, 159, 160, 162, 164, 165, 169, 170, 171, 179, 181, 183, 184, 186, 216, 228, 229, 230, 232 to 236 inclusive, 238, 239, 241, 244, 246, 247, 266, 320, 322, 323, 325 to 330 inclusive, 347, 348 and 349.

Your Lordships should not get distressed by this great number of Amendments, because a large number are consequential, and I shall not have to speak at any great length on each and every one of them. The main object of this group of Amendments is to extend the Board's supervision to all classes of insurance business. I am quite sure that, particularly in view of relatively recent events in the insurance world, there will be general agreement among your Lordships that the objectives at least of these general clauses and Amendments in particular are desirable and much in the public interest.

It is necessary, in my view, to move these Amendments in order to make the new control powers introduced by the present Bill effective over the whole range of insurance business conducted by the insurance companies. At the same time, the Amendments regroup and redefine the classes of business. The most significant Amendments are Nos. 132, 135, 165, 238, 239, 244 and 246, which introduce seven new clauses. The substantive Amendment is Amendment No. 132, which is supplemented by Amendment No. 238. The other Amendments are largely consequential.

Briefly, the seven new clauses will have the following main effects. The new clause under Amendment No. 132 makes Part II of the Bill apply to all classes of insurance. Six of the existing classes under the 1958 Act are redefined so as to take in, together with two new classes, the types of insurance to which supervision is now extended. This extension is needed so that the new system of authorisation introduced by Clause 50 as replaced by Amendment No. 135 comes into effective operation. The extension also takes account of the growing importance of various types of insurance not previously supervised. As examples of that, I would cite credit insurance, and possibly glass insurance, plate glass insurance, burglary insurance when the insurance is against burglary only and not, as is more usually the case, against fire and theft.

The definitions which are now adopted do not in fact differ much from the former ones, and they have the additional advantage of enabling Her Majesty's Government to conform with the recommendation by the Organisation for the Economic Co-operation and Development that class definitions should be based on an agreed standard classification. This is a considerable advantage.

The new clause under Amendment No. 238 qualifies the class definitions so as to enable companies whose policies in one particular main class embrace risks of another class written as incidental to the main risk without requiring an authorisation from the subsidiary class; in other words, it is a simplifying clause which will make the efficient operation of the insurance companies somewhat easy.

The new clause under Amendment No. 239 exempts from the operation of Clause 49 and of the principal Act, bankers who carry on one of the new insurance classes known as "pecuniary loss insurance business" in the course of their banking business, because it is not really felt appropriate that such bankers should be supervised. So that again is what one might call a relaxing Amendment.

The new clause under Amendment No. 244 is no more than one which facilitates the transitional period and provides for transition. The new clause under Amendment 246 is also a transitional provision needed to prevent any dislocation of the business of those insurance companies which carry on only classes of business to which the principal Act does not apply until the Bill is enacted, and which are expressly precluded by the wording of their memoranda of association from carrying out any class of insurance business to which that Act, or any enactment amending or extending that Act applies.

LORD DRUMALBYN

My Lords, would the noble Lord say which Amendment he is referring to now?

LORD WALSTON

My Lords, this is Amendment No. 246.

LORD DRUMALBYN

My Lords, with respect to the noble Lord, he did not list that among the clauses that he was dealing with.

LORD WALSTON

My Lords, apologise to the noble Lord. It is not for me to suggest that perhaps I spoke too fast, and therefore he was unable to take it down.

LORD FERRIER

My Lords, the noble Lord said "249".

LORD WALSTON

My Lords, all I can say is that it is on the piece of paper from which I read; but it is perfectly possible that in this long list I did skip over No. 246.

LORD DRUMALBYN

My Lords, with respect, it is not on the list. I have the list also. It comes much lower down the list, and I was hoping to raise that separately.

LORD WALSTON

My Lords, then there must be more than one list. I can assure the noble Lord that it is on the list from which I read, and my suspicion is that I did read it out. Would the noble Lord rather I did not proceed with it? It is most germane to this particular group of Amendments. It is not in fact an Amendment of enormous substance but is a facilitating Amendment, which is designed to make life easier for the companies which are affected by this Bill as a whole, and to ease their path during what might otherwise be an awkward transitional period.

There are, as noble Lords well realise, certain companies whose memoranda of association define within fairly close limits the type of business they can undertake, and as the result of this Bill they may feel that they wish to enlarge the scope of their business. This will entail extending their memoranda of association. This will take a little time, and the sole object of this clause is to enable them to carry on business during such time. I do not know whether that is a sufficient explanation to encourage the noble Lord to let me deal with these clauses together. But if he is not satisfied now or at a later stage, I will withdraw Amendment No. 246 from this group and speak to it when it takes its turn in the list.

LORD FERRIER

My Lords, I am sorry to interrupt the noble Lord. Amendment No. 246 seeks to insert another clause after Clause 87. I cannot quite make it follow. Is it correct that it is Clause 87?

LORD WALSTON

It certainly inserts a new clause, and I think the noble Lord is right in saying that it occurs at that point. I see that Amendment No. 246 is that, "After Clause 87 insert the following new clause", which reads: Any provision of a company's memorandum of association that expressly precludes it from carrying on insurance business of any class shall cease to have effect. That is one to which I am speaking.

LORD FERRIER

Yes, my Lords, but if one refers to Clause 87 it does not seem to fit in.

LORD WALSTON

Amendment No. 246 is to be inserted after Clause 87, and is to be a new clause.

LORD FERRIER

I am sorry, I still cannot make it make sense.

LORD WALSTON

My Lords, I am sorry that my explanation is not sufficiently clear to the noble Lord, but I hope that, even if the actual position in the list is unclear, the meaning and the scope of the Amendment is clear. It is more important what it does rather than where it actually appears in the Bill. If it is not clear to the noble Lord, undoubtedly he will let me know in due course where it is not clear and I will try to clarify the position further. Then there is a further new clause under Amendment 135 which is simply a replacement of Clause 50, which is a redrafting Amendment; and a further drafting Amendment, which is the new clause mentioned under Clause 165. All the other very long list of approximately 50 Amendments are purely consequential on one or other of these clauses. I beg to move that this House doth agree with Commons Amendment No. 132.

Moved, That this House doth agree with the Commons in the said Amendment.—(Lord Walston.)

LORD DRUMALBYN

My Lords, I have expressed condolences with the noble Lord for having had to move such an enormous collection of Amendments which would have made a Bill in themselves. I think that he has answered most of the queries I had in mind, particularly that Amendment No. 135 makes no alteration in substance at all in the existing Clause 50. This was a clause which was the subject of a good deal of misapprehension at the time as to what had and had not to be authorised. I think we have now got it clear, although I am bound to say that, comparing the existing Clause 50 and the new clause, I was not at all certain that there were no changes of substance. I am glad to have his assurances that there are not.

On this particular clause I am afraid that I have not been able to understand the noble Lord's explanation of the new clause in Amendment No. 246. I still fail to understand how it is right to secure a temporary provision to enable a company whose memorandum of association expressly precludes that company from carrying on insurance business to carry it on. It seems to be a very curious provision to make in order to achieve a purely temporary effect. But there it is. I do not think there is anything we can do about it now, but I am not at all sure that this was the right way of going about this particular provision.

Dealing with this series of Amendments as a whole, they represent not only quite an extension of the Bill, but a considerable alteration in the concept of the Bill and the classes of insurance in general. I am bound to say that this is such a fundamental change that it is one we feel ought to have been thought of before the Bill was introduced in the first place, rather than at this stage. It may be that this was done in response to representations which were made after the Bill came into effect. I suspect that that is not so, and that it was done as a result of second thoughts in the Board of Trade. I think that this is regrettable. The main reason why it got a place in this Session's legislation at all was because of the insurance aspects, and one would have hoped that this part of it had been, to use the noble and learned Lord the Lord Chancellor's words, carefully prepared in advance of its being brought before us. It is an extraordinary series of Amendments, and I do not think it reflects the greatest credit on the Government's management of business.

LORD CHORLEY

My Lords, I think Amendment No. 246 is intelligible, although I have not done a geat deal of research into it. In earlier times different sorts of obligation in respect of giving security were imposed on different types of insurance company. When they were formed, companies had to put the type of business they were going to do in the memorandum of association. I imagine that they wished to preclude themselves from entering upon certain areas of insurance which would have attracted obligations with which they did not wish to comply. Therefore, it was quite sensible to say: "While we have set up this company for the purpose of conducting certain types of insurance, we do not intend to conduct other types of insurance, and we preclude ourselves from doing so". If the noble Lord looks at the actual words, he will see that it talks about a "class"—that is to say, insurance business of any class. This surely means an area of insurance such as accident insurance, or whatever it may be.

The obligations imposed under the Bill are quite different. It is quite reasonable to say that, as these obligations are quite different from the old ones which the organisers of a company had in mind when they excluded that particular class of insurance from the business they intended to do, if they had had to comply with the obligation laid down in the present Bill they would not have made that exclusion. It seems not unreasonable that there should be an omnibus clause of this kind which gives power to do this, instead of having to go through all the rigmarole of special resolutions, and so on, in order to alter the objects for which the company is now going to operate. This is a simple and sensible way of handling that particular problem. That is what occurs to me on a rather cursory examination of this matter. It may be that that it is not right, but it seems to me a reasonable explanation.

LORD FERRIER

My Lords, I think I have the point.

LORD CHORLEY

My Lords, with regard to the general group of clauses, they are very valuable indeed. They fall into line with the extended powers of the Board in relation to inspections, which we were discussing earlier. Some of the recent scandals in connection with insurance have brought very much into the limelight the fact that the control over insurance has been altogether inadequate. There has been, indeed, no control over insurance within living memory, and particularly on the security side the requirements were most inadequate. If you compare what was laid down in the Act of Parliament with what was required at Lloyd's (the way in which they built up security in that institution was a model in this respect), the position is very much exemplified: in much the same way as the Stock Exchange have to a very large extent led Parliament in the requirements which now appear in the Companies Bill.

It is high time that very much tighter control was exercised over the business of insurance, because there is hardly anybody in the country who is not insured in one way or another. It is right that an area of business in which the social implications, as well as the economic ones, are so tremendously widespread, and so tremendously important to the great mass of the citizens, should be very carefully looked after by the organs of the State. That certainly was not done, and this Bill goes at any rate some distance towards doing that.

It is true that this has been introduced at a very late stage in this Bill but, as we all know, better late than never! I am inclined to think that there was a certain amount of hurry about this in the first instance, and this Bill has been worked over in the Board of Trade. As I said earlier, I know that they have been in consultation with commercial lawyers in regard to many of the matters which appear in this Bill, and it is clear that during these last weeks they have succeeded in working out a very much more effective system of control than was provided in the Bill when it first came before your Lordships' House. I think it is a good thing that that should have been done, and I welcome this group of clauses.

LORD HAWKE

My Lords, I think this will be the most convenient opportunity to make a few short remarks at large on this part of the Bill. It deals reasonably effectively with certain of the risks to the general public—the risks of fraud and failure—though I am still doubtful whether the margin of £50,000, et cetera, is a wide enough one. When the long list of new clauses started to unfold before my eyes, my hopes were raised that they might deal with the two very grave risks to the general public which I mentioned on Second Reading. But I am afraid that when I had got to the end of them my heart sank, because it never touched them at all.

I refer, first, to the risk which anybody may run if he moves somebody else's car from one corner of the road to another, and happens to injure somebody on the way. He may be financially ruined because that car may not be insured for any driver, and he may have no knowledge whatsoever of that. Secondly, if any of us accept a lift as passengers in a car, and then, through an accident, happen to be crippled for life, we may never know whether we can get any compensation, because we have no means of knowing whether the car has been insured in respect of passengers. Those are the points which I think are most urgent for the protection of the public, and I trust that Her Majesty's Government will do something about them in due course.

On Question, Motion agreed to.