§
[No. 44]
After Clause 41, insert the following new clause—
§ Misleading statements etc. inducing person to enter into contract of insurance
§ ". Any person who, by any statement, promise or forecast which he knows to be misleading, false or deceptive, or by any dishonest concealment of material facts, or by the reckless making (dishonestly or otherwise) of any statement, promise or forecast which is misleading, false or deceptive, induces or attempts to induce another person to enter into or offer to enter into any contract of insurance with an insurance company shall be guilty of an offence."
§ THE EARL OF LIMERICKMy Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 44. With this Amendment I propose that we take Amendments Nos. 53 and 54. The Report of the Scott Committee on linked life insurance was published on April 18, shortly after we gave a Third Reading to the Bill in this House on April 12. Amendment No. 44 is the first that stems directly from that Report, and it may be helpful if I indicate very briefly what the Government have done to implement its recommendations. By keeping in touch with the Committee's thinking when preparing the Bill, we were able to anticipate a number of recommendations, particularly those dealing with solvency. Many of the Scott Committee's other recommendations break new ground, particularly those dealing with the conduct of linked life insurance schemes and those dealing with selling methods.
These recommendations flow from six basic ideas: first, that prospective linked policyholders should be given a document describing in simple terms the main features of the policy; secondly, that linked policyholders should be entitled to a cooling-off period; thirdly, that it should be an offence to issue misleading sales material; fourthly, that the value of assets to which policies are linked should be properly determined; fifthly, that proper accounts should be kept for internal funds; and, sixthly, that linked 1587 policyholders should be sent annual reports about the linked scheme of which they are members. We agree with all six of these basic ideas and the necessary Amendments were introduced. Much of the detail remains to be filled in by regulation, but this is inevitable bearing in mind that the Scott Report was published only on April 18. I think we can fairly claim substantially to have implemented the Scott recommendations in the new clauses, starting with the one to which I now turn.
Amendment No. 44 implements Recommendation 39 of the Scott Committee's Report, that it should be made an offence to issue misleading sales material. We think it right that this recommendation should be applied to all forms of insurance. Reputable insurance companies take great care that their sales material is fairly presented. Even so, this clause will be a valuable addition to the law in that it should allow action to be taken at least against any deliberately misleading sales material; and, perhaps more important, it should act as an incentive to use great care in the preparation of sales material generally. The Scott Committee took Section 13 of the Prevention of Fraud (Investments) Act 1958 as their model and the clause closely follows that section, as amended in 1963 by the Protection of Depositors Act. The clause does not refer explicitly to that part of the Scott Committee's recommendation that, in the case of forecasts, the dishonest concealment of material assumptions should be an offence. The aim is to ensure that material assumptions are disclosed. We think that this will be achieved more effectively by regulations under Clause 41. We have it in mind, for example, to require assumed rates and periods of growth to be stated with any forecast of benefits.
The Scott Committee commented that there is some uncertainty as to whether the Prevention of Fraud (Investments) Act could be held to apply to some linked contracts. As a consequence of the recommendation which I have just mentioned, they further recommended that,
… it should be made clear by Statute that the Prevention of Fraud (Investments) Act 1958 does not apply to linked life assurance",because this is more appropriately regulated in insurance legislation, and it is 1588 done specifically in this area by the new clauses which we are considering. Amendment No. 53 implements that recommendation. Amendment No. 54 makes the penalty for an offence under Amendment No. 44 on conviction on indictment a term of imprisonment not exceeding two years, or a fine or both, or on summary conviction a fine not exceeding £400. This is the heavier of the two standard penalties under Clause 46, but it is justified by the potentially serious nature of the offence. My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 44.
§ Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)
THE EARL OF SELKIRKMy Lords, instead of saying "by the reckless making … of any statement", would it not have been better to say "by recklessly making any statement"?
§ THE EARL OF LIMERICKMy Lords, my noble friend Lord Selkirk may well be right. This point could have been considered by the draftsman, but I am afraid that it is a little late to put it to him now.