After Clause 42, insert the following new clause:
§ Linked long-term policies
§ ".—(1) Regulations may be made, as respects the matters specified in subsection (2) below, in relation to contracts of the kinds mentioned in section 59(6) of the Act of 1967 (long term insurance contracts) which—
- (a) are entered into by insurance companies to which the Act of 1958 applies or by members of Lloyd's or of any other association of underwriters approved for the purposes of Part II of the Act of 1967 by the Secretary of State; and
- (b) are contracts under which the benefits payable to the policy holder are wholly or partly to be determined by reference to the value of, or the income from, property of any description (whether or not specified in the contract) or by reference to fluctuations in, or in an index of, the value of property of description (whether or not so specified).
§ (2) Regulations under this section may make provision for—
- (a) restricting the descriptions of property or the indices of the value of property by reference to which benefits under the contracts may be determined;
- (b) regulating the manner in which and the frequency with which property of any description is to be valued for the purpose of determining such benefits and the times at which reference is to be made for that purpose to any index of the value of property;
- (c) requiring insurers under the contracts to appoint valuers for carrying out valuations of property of any description for the purpose of determining such benefits (being valuers who comply with the prescribed requirements as to qualifications and independence from the insurer) and to furnish the Secretary of State with the prescribed information in relation to such appointments;
- (d) requiring insurers under the contracts to furnish in such manner and at such times or intervals as may be prescribed, such information relating to the value of the benefits under the contracts as may be prescribed, whether by sending notices to policy holders, depositing statements with the Secretary of State or the registrar of companies, publication in the Press or otherwise;
- (e) requiring insurers under the contracts to furnish to the Secretary of State, in such manner and at such time or intervals as may be prescribed with respect to so much of their business as is concerned with the contracts or with any class or description of the contracts, and enabling the Secretary of State to publish such information in such ways as he thinks appropriate.
§ (3) Regulations made for the purposes of subsection (2)(d) above may, in relation to notices required to be sent to policy holders, impose requirements (whether as to type, size, colour or disposition of lettering, quality or colour of paper, or otherwise) for securing that such notices are easily legible.
§ (4) Regulations under this section may make different provision in relation to different cases or circumstances; and the Secretary of State may, on the application of any insurer, alter the requirements of any regulations under this section so as to adapt those requirements to the circumstances of that insurer or to any particular kind of contract entered into or proposed to be entered into by that insurer.
§ (5) Regulations under this section may, to such extent as may be specified therein, apply in relation to contracts entered into before the coming into operation of the regulations, including contracts entered into before the passing of this Act.
§ (6) Regulations under this section shall not apply in relation to any contract the effecting of which by the insurer constitutes the carrying on of industrial assurance business or to any contract entered into by an insurance company to which the Act of 1958 applies by reason only that the policy holder is eligible to participate in any established surplus as defined in section 9(4) above."
§ 6.11 p.m.
§ THE EARL OF LIMERICK
My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 52. This new clause is designed to enable the Department to implement the Scott Committee Recommendations, 14 to 23, 24 to 27, and 31 to 35. The first group of recommendations envisage that the Department should issue from time to 1598 time a list of the types of asset to which policies may be linked and measures to ensure that these assets are properly valued. The Scott Committee, in paragraph 137 of their Report, suggest some types of asset which might be included in the list—units in authorised unit trusts, quoted securities, land and real property in the United Kingdom, deposits with a building society. The Scott Committee go on to suggest, in paragraphs 140 to 154 of the Report, that where there is no immediately available current market price assets should be independently and professionally valued, and they make a number of detailed recommendations to this end. In the case of linked policies it is the value placed on particular assets that determines the benefit payable and the Scott Committee's proposals are intended to ensure that that calculation is soundly based. They largely reflect the best business practice and, subject to consultation with the industry on details, it seems to us right that these standards should be made general and mandatory.
The second group of recommendations basically envisage that where policies are linked to an internal fund, a set of accounts should be drawn up for that fund and should be audited. The third group of recommendations envisage the policyholder being sent an annual report about the scheme of which he is a member and regular information about his particular policy. The Scott Committee also suggest that the price of units in internal funds should be published regularly. Under linked policies the benefits to which policyholders are entitled depend directly on the skill with which the insurance company invest the premium receipts and it is right that the company should report regularly on the success (or otherwise) of its investment management. Again the Scott Committee's recommendations largely reflect best business practice and those standards should be made general and mandatory.
Against that background I need deal only briefly with the text of the new clause. Subsections (1) and (6) define the policies to which the regulations are to apply: that is, linked policies. Subsection (2) defines the matters as to which regulation may be made: paragraph (a) deals with the list of types of assets to which policies may be linked; paragraphs (b) and (c) with the valuation of those 1599 assets; paragraph (d) with regular reporting and paragraph (e) with the accounts of internal funds. Subsection (4) allows the regulations to be adapted to suit the particular circumstances of a particular insurer or of a particular kind of policy. Linked life insurance is still a rapidly changing sector of the industry: we think this extra degree of flexibility desirable to make the provision as effective as possible in protecting the interests of policyholders.
§ Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)