HL Deb 02 March 1971 vol 315 cc1286-90

4.0 p.m.

EARL. JELLICOE

My Lords, with permission, I should like now to repeat a Statement which my right honourable friend the Prime Minister has just made in another place concerning the affairs of the Vehicle and General Insurance Company, Ltd. These were my right honourable friend's words:

"As honourable Members are doubtless aware, the directors of the Vehicle and General Insurance Company Ltd. announced yesterday evening their intention to petition the Court for the compulsory winding-up of the company and of five of its subsidiary companies which carry on largely motor insurance business.

"The names of these companies are as follows:

  • Automobile and General Insurance Co. Ltd.
  • The General and Commercial Motor Insurance Co. Ltd.
  • Metropolitan General Insurance Co. Ltd.
  • Transport Indemnity Insurance Co. Ltd.
  • The World Auxiliary Insurance Corporation Ltd.
"In order to comply with the requirements of the Road Traffic Act 1960, motor insurance policies must be issued by authorised insurers who are carrying on motor vehicle insurance business in Great Britain. The policy-holders of the companies in question should, therefore, take out new policies with authorised insurers if they wish their cars to continue to be used on the roads. Both the directors and the British Insurance Association have already advised policy-holders to obtain cover from other insurers.

"I understand that the petitions for winding-up are being presented today but I cannot forecast the time required by the Court to deal with them.

"The financial affairs of the company and its subsidiaries has been under close consideration for some time by the Department who have been frequently in touch with the directors. The Department, in compliance with Section 68 of the Companies Act 1967, on February 24 duly served the requisite notice of 30 days on the companies concerned of the intention of the Department to issue directions restricting the companies from issuing new policies or renewing old policies."

My Lords, that is the conclusion of the Statement.

LORD SHEPHERD

My Lords, I must say that it is strange that the Prime Minister should have made that particular Statement in the other place, and I wonder whether there is any special significance in that. I thank the noble Earl for repeating it here. Certainly our sympathy must go out to the policy- holders who, clearly, are going to lose a great deal of money as a consequence of this collapse. Is the noble Earl not aware that there was considerable concern in the City and in insurance circles—I think it was in October—about the financial stability of this company? Can he say when the Department of Trade and Industry started to take an interest in, and to examine, the books of this organisation? Can he also say whether, as a consequence of this very serious collapse, the Government would now feel it right to review the 1967 Act to see whether it is strong enough, and whether there is anything to be learned; so that perhaps we can avoid some of the severe losses to policy-holders?

LORD GLADWYN

My Lords, like the noble Lord, Lord Shepherd, on behalf of noble Lords sitting on these Benches I deplore what has happened. Personally, I should like to associate myself with the inquiries and queries put by the noble Lord.

EARL JELLICOE

My Lords, like the two noble Lords who have just spoken I too deplore these events. In answer to the first question from the noble Lord, Lord Shepherd, it is the fact that, because there were rumours about the solvency of these companies, the group's accounts for the calendar year 1968, which were received shortly after the end of June, 1969, were examined most carefully by what was then the Board of Trade. There was a further and, I think, even more searching examination in the summer of last year of the accounts for the calendar year 1969. So it is true to say, my Lords, that the company has been receiving the very close attention of the Board of Trade—now the Department of Trade and Industry—for a considerable number of months past.

I think it was at the end of last year that the Department learned that the company were finding it difficult to sell the trading investments which they had undertaken to do, and it was then that the Department pressed the directors for much further and more detailed information. It was as a result of that information that the decision to serve notices on the companies in accordance with Section 68 of the 1967 Act was taken.

My Lords, I think it is natural that the second question from the noble Lord, Lord Shepherd, should be put to me, about whether we ought to look at the 1967 Act to see whether it needs reinforcement. I can say straight away that this point is very much in the mind of Her Majesty's Government, but there are two considerations which I think need to be borne in mind. The first is that the existing powers will be quite materially strengthened as a result of the information which will become available through the summer of this year under the Insurance Companies (Accounts and Forms) Regulations 1968. There has been a delay as a result of decisions—I am not questioning them—taken by the previous Government.

The other consideration (I am not saying this in any way in a tendentious spirit) is that major changes in the United Kingdom insurance legislation might be required if this country were to join the European Economic Community; and there is at least a case to be made for seeing whether or not we are able to join the Community before embarking on any major changes. That said, my Lords, may I apologise straight away to the noble Lord, Lord Shepherd, who, quite rightly, queried whether the Prime Minister had made this Statement in another place. It was, in fact, my right honourable friend the Secretary of State for Trade and Industry; and I should like to take this opportunity to make that correction forthwith.

LORD SHEPHERD

My Lords, I am glad that the noble Earl was not indicating that the Prime Minister had been demoted—although many of us would wish that he could be.

LORD WELLS-PESTELL

My Lords, bearing in mind the serious situation in which policy-holders now find themselves may I ask the noble Earl the Leader of the Opposition whether they will in any way—

SEVERAL NOBLE LORDS

Oh!

LORD WELLS-PESTELL

I do apologise my Lords.

EARL JELLICOE

A somewhat similar mistake is made from time to time in another place, so that the noble Lord is in good company.

LORD WELLS-PESTELL

It is obviously wishful thinking on my part. May I ask whether the British Association of Insurers will in fact be giving the present policy-holders any cover at all?

EARL JELLICOE

My Lords, these are technical waters into which I would not wish to be drawn too deeply. My understanding is that until winding-up orders are made in respect of the company or its subsidiaries—and that is a process which I gather may take anything up to at least a week or ten days—it is still lawful for policy-holders to rely on the company's certificate of insurance for the purposes of complying with the Road Traffic Act. Claims arising in general from the use of those policies could take a number of years to settle—except for claims arising from personal injury to third parties other than passengers. But under arrangements made with the Department of the Environment, the Motor Insurers' Bureau, which is financed partly by Lloyd's and partly by the insurance companies, will pay such claims—that is to say, claims for third party insurance other than claims in respect of passengers in the vehicle concerned—when the insurance company concerned is unable to comply with them.

LORD WELLS-PESTELL

My Lords. I am obliged to the noble Earl.