§ 7.40 p.m.
§ THE PARLIAMENTARY UNDERSECRETARY OF STATE, DEPARTMENT OF TRADE AND INDUSTRY (THE EARL OF LIMERICK)
My Lords, I beg to move that the House do again resolve itself into Committee on this Bill.
§ Moved, That the House do again resolve itself into Committee.—(The Earl of Limerick.)
§ House in Committee accordingly.
§ [The EARL OF LISTOWEL in the Chair.]
§ Clause 11 [Grounds on which powers are exercisable]:
§ On Question, Whether Clause 11, as amended, shall stand part of the Bill?
§ THE LORD CHANCELLOR
Before my noble friend speaks may I intervene, partly to apologise for not having been present on the previous debate—but I assure the Committee that I have studied what took place with as much care as I am capable of—and because I could not help noticing that at the close of the proceedings last time the noble Lord, Lord Diamond, who then spoke for the Opposition, gave this advice to the Committee. He said:The debate has been very valuable and it seems to me that it would now he appropriate for us all to reconsider the various well-informed and well argued views that have been put forward, and return to this matter at a later stage. On that basis, I do not think it would be in the best interests of the Committee that we should debate at length the very important principle raised by this clause."—[OFFICIAL REPORT, 22/2/73, c. 351.]I and my noble friends have been giving considerable thought to this matter and the conclusion we have arrived at tentatively (I do not know whether it will meet with the Committee's approval, and of course I am entirely in their hands) is that the advice given by the noble Lord Lord Diamond, is right and wise advice. 1086 There is a whole complex of inter-related if separate matters and my noble friend Lord Limerick has promised to bring the matters back for discussion to my right honourable friend Sir Geoffrey Howe. It would be a slightly academic question to examine again the principles of Clause 11 in the absence of the proposals, which I hope will be made and ready by Report, although I am not giving an undertaking to that effect, and I would rather hope, therefore, that the advice tendered by the noble Lord, Lord Diamond, on that previous occasion could now be accepted by the Committee.
THE EARL OF SELKIRK
May I ask one question? I do not want to violate what the noble and learned Lord the Lord Chancellor has said in any way, but there is one point, not a point of major principle, on which perhaps he could say something. I am told that many countries overseas have read that we are having an insurance Bill in this country. They have seen that certain powers about reinsurance exist there—they probably have not read them very closely, but they have asked this question, "Does the Government want to interfere in any way with a very delicate and important historical function in London of developing reinsurance on an international basis, all over the world?" This business is enormously valuable to us, both as a foreign trade invisible export and also, quite rightly, in the principles of insurance, spreads risks of a big disaster over an immensely wide area, from Tokyo to Chicago and elsewhere. If the noble and learned Lord the Lord Chancellor can give an assurance that it is not the intention of the Government to interfere with international reinsurance, and that possibly his intention is to develop and help it, then I believe that would be greeted overseas with much satisfaction.
§ THE LORD CHANCELLOR
I believe that I can give my noble friend the kind of assurance for which he is seeking. Reinsurance is, of course, a very valuable part of our invisible exports and of the functions of the City of London in relation to insurance, and the last thing which is in our minds is to reduce that source or that prestige value of the City of London. Our overseas earnings on insurance generally are of course, as is 1087 very well known, quite substantial, and reinsurance makes an important, although not the only, contribution to those earnings. Our view is that these earnings will not be affected by the Bill, although reinsurance companies will be dealt with in exactly the same way as other insurance companies. We believe, on the contrary, that this Bill will strengthen the position rather than weaken it. If we bear in mind what the Bill is for, I think we can see that that is so. We have sought to prevent failures of companies such as those which we have seen fail in recent years, and we think that if they were to continue without the reinforcement of this Bill that could in fact lead to some loss of confidence overseas to the detriment of both insurers and reinsurers; and it is precisely because we want to strengthen confidence in both classes that we have introduced this Bill, with whatever merits or defects it might have.
§ LORD BROWN
I did not quite understand whether the noble and learned Lord's opening remarks were directed to Clause 14, which we are now discussing. He did make mention of Clause 11.
§ THE LORD CHANCELLOR
I believe that the question which the noble Lord in the Chair proposed was, Whether Clause 11, as amended, shall stand part of the Bill? I was not seeking in any way to curtail discussion but possibly to make a suggestion as to the line the discussion would take.
§ LORD STOW HILL
I do not know whether from these Benches I might intervene shortly, speaking purely for myself, but in effect to answer what was put in the form of a question by the noble and learned Lord the Lord Chancellor. I should have thought, if I may respectfully say so, that the course which he has proposed is an extremely sensible one. Clause 11 raised, among the other issues at large in this debate, that which arises on subsection (1)(e). That paragraph introduces the whole complex of Amendments which deal with the question of natural justice and which have been compendiously referred to in the course of our debates as the "fit and proper person" clauses. When we were discussing those clauses earlier in the Committee stage of this Bill the 1088 Minister in charge, the noble Earl, Lord Limerick, stated that he would give very careful consideration to the arguments that were used; and the noble and learned Lord the Lord Chancellor has said that his right honourable friend Sir Geoffrey Howe is also concerned in that aspect of the Bill.
That being so, and speaking for myself—and I can only speak for myself—I very warmly accept the proposal made by the noble and learned Lord that we should put Clause 11 in cold storage, as it were, so that we can see what emerges as a result of the thinking of Ministers in view of the arguments that have already been pressed to the Committee on that clause. That is all I wish to say; but, speaking for myself, I entirely agree with the proposal made.
§ LORD ALDINGTON
I, too, welcome the line taken by the noble and learned Lord the Lord Chancellor. I believe that he will know that the point which the noble Lord, Lord Stow Hill, has made, is not the only point that arises on Clause 11. He will know that I was planning to rehearse my views on some of the other points. But I believe that he will know also that I have used the interval to see that his right honourable friend, and the noble Lord sitting next to him, were aware of what those points are. So, I hope that if I am now silent on those points it will not be taken to mean that I have not got quite a number of points.
The only other point I should like to make is that on the succeeding clauses, namely, Clauses 12 to 20, there are some points that one would want very shortly to raise, as Clause 11 now stands. If I may promise him this, he will be pleased: I will make the points very shortly, but I still think it right to put a marker down on those clauses so that it cannot be said when we come back to them on Report stage, whatever the new drafting of Clause 11 may be, that I have, as it were, acquiesced in some of the results that follow from some of the clauses. Subject to that (and I think that by nodding the noble and learned Lord indicates that he understands the point), I welcome what has been said.
§ LORD BROWN
It is always commendable for a Government to be prepared to reconsider, but I hope they 1089 are not going to reconsider to the extent of drastically weakening this Clause 11. I find myself possibly diminishing into a minority of one. I had the support of the noble Earl the Minister in the previous debate—or perhaps it was the other way round and I was supporting him. It is unfortunate to be arguing with one's own friends on these Benches. This call for natural justice is all very well. It is always a good cry to put up in this House at any time. But, without wishing to rehearse all the arguments, which I tried to deal with and the Minister himself dealt with at the earlier stage of the Committee, I would say this. The search for natural justice for the individual director of an insurance company has in the past often led to a great lack of justice for thousands of people who have paid premiums and who can ill afford to lose the money which they have paid out, because the insurance company has gone broke. It is not a matter of prophesying what might happen; it is a question of looking back to see what has in fact happened.
Although some very rigorous powers are available in the 1967 Companies Act, with which I am extremely familiar because I took that Bill through this House—and, I may say, with very little dissent from this House—it appears they have not proved sufficient. If there is much retreat from the underlying principle with regard to dealing with persons who are not appropriate to run insurance companies, we shall expose ourselves to another danger. There may be an element of injustice that can arise under the provisions of the Bill as it stands—I am not denying that for one moment—but if one has to choose between giving real natural justice in every case in order to avoid any injustice to insurance company managers or directors, and the other side of the penny is to risk thousands of people who can ill afford to lose their premiums, I prefer to protect the policy holder every time. I hope the Government are not going to weaken on this.
§ THE LORD CHANCELLOR
I am very grateful for what has been said by the noble and learned Lord, Lord Stow Hill, and my noble friend Lord Aldington and by the noble Lord, Lord Brown. I noted what the noble Lord, Lord Brown, had said on the previous occasion. I am not saying by any means that what will 1090 emerge will be exactly what has been proposed by my noble friend or by the Front Bench opposite. What I am seeking to do, or rather what my right honourable friend is seeking to do, or the Government are seeking to do, is to try to achieve a proper balance between two objectives, which I agree have some divergent possibilities; otherwise, I suppose we would not have had the debate last time. Quite clearly, this Bill has been brought in, and indeed the previous Bill, the part of the 1967 Companies Act which was brought in by the noble Lord, Lord Brown, was brought in because there had been scandals, and because not only are the rights of policy holders affected adversely but also it does in fact operate adversely to the prestige of this country as an insurance centre that scandals should happen.
I would not go quite so far as the noble Lord, Lord Brown, and say the powers were insufficient; what we have found is that the powers are insufficiently flexible. If you have power to stop a company altogether, which is what the Companies Act 1967 allows you to do, you can hardly say your powers are insufficient. But what in fact has been discovered, and what was brought out very clearly I think by the V. & G. Report, is that if your powers are too draconian (if I may use that phrase), you hesitate to use them before the damage is done. The Bill is designed to provide a greater range of powers, most of which are less draconian than those already possessed. I fully take the point which my noble friend Lord Aldington has taken. It was precisely because my right honourable friend was very much concerned, and has been made fully aware of the strength of feeling expressed from these Benches and the Front Bench opposite, that I made the proposal I did, and I am very grateful for what noble Lords have said.
§ LORD JACQUES
I would say two things very briefly. First of all, we should like to support entirely the statement made by the noble and learned Lord, the Lord Chancellor. The purpose of this Bill is to protect the policy holder. That should foster our interest in insurance and our insurance business rather than retard it. Secondly, the Opposition has moved three Amendments to Clause II, on subsection (1)(f), subsection (3) and subsection (4). We have not lost interest in 1091 these Amendments, but we have had assurances from the Minister that our view will be considered and something may come forward at the next stage of the Bill. We have accepted those assurances, and prefer to leave it there until the next stage.
§ Clause 11, as amended, agreed to.
§ Clause 12 agreed to.
§ Clause 13 [Requirements about investments]:
§ On Question, Whether Clause 13 shall stand part of the Bill?
§ 7.55 p.m.
§ LORD ALDINGTON
I have one point only to raise.
Does my noble and learned friend not think these powers go a little wide? It seems to me, reading the Bill as it is now drafted, that the Secretary of State really has powers to intervene in the investment policy of any insurance company and to give it certain directions. I should have thought that that was wider than it need go, at any rate for part of the investments of insurance companies. It may be that there is a requirement, in order to protect policy holders, that investments representing liabilities and the solvency margin ought to be subject to surveillance and direction. But I would question whether investments representing surplus funds beyond that are properly within the power of surveillance of the Secretary of State. I would ask my noble and learned friend to think about that before Report stage.
§ THE LORD CHANCELLOR
Of course, what my noble friend has said will be conveyed to my right honourable friend, and I am sure he will give it full weight. I think what we have to remember in relation to Clause 13 is that the powers given to the Secretary of State under Clause 13 can be operated only on the grounds set out in Clause 11, and this effectively restricts them. If that is thought of at length, I should rather doubt whether they are as wide as my noble friend Lord Aldington thinks. For instance, the first ground under Clause 11 is that the company may be unable to meet its obligations. To make it realise part of its investments, or to restrict it from investing in a speculative fashion, I 1092 should have thought was the mildest possible sanction. Obviously these powers are strong. They are intended up to a point to be strong, but Clause 11 does restrict them. However, I do not want to say anything which would detract from what I said to begin with. My noble friend's point is noted, and I will see that it is conveyed to my right honourable friend.
§ LORD ALDINGTON
If I may make my point quite clear, of course I agree with what the noble and learned Lord the Lord Chancellor has just said. It all depends on the final wording of Clause 11, but at the moment Clause 11 gives the Secretary of State the right to use this power ifit appears to him that there has been a change in the persons who are controllers of the company".As the Bill is at present drafted—I hope that this will be altered—this means any change in the directorship of the company, and since that takes place every year, in theory the power is available. That is the main reason why I have taken this point on Clause 13.
§ LORD JACQUES
Our view is that the Clauses 12 to 20 are needed. What is required is a suitable Clause 11. We regard Clause 11 as not being satisfactory at the moment, but have no complaint with Clauses 12 to 20.
§ Clause 13 agreed to.
§ Clauses 14 to 17 agreed to.
§ Clause 18 [Acceleration of information required by accounting provisions]:
§ On Question, Whether Clause 18 shall stand part of the Bill?
§ 8.0 p.m.
§ LORD CACCIA
On Clause 18 I would raise not a question of principle, but one of practicality. Accelerated information is required and in the general context of Clause 11 that is difficult to argue, because Clause 11 is going to be redrafted; but the requirements are for information to be provided within certain specified time limits. I think it is a fact that certain companies with worldwide interests may find it impossible, 1093 even with the best will, to fulfil the requirement here set out, if pressed to do so in any literal fashion. Therefore, I ask this question: does the Minister accept that there might be this theoretical difficulty for a world-wide company and, if so, is it reasonable to put in a Bill a requirement which in fact may not be practical for such companies to carry out?
Tim LORD CHANCELLOR
I am grateful to the noble Lord on the Cross-Benches for having raised this matter. I quite agree that if the power were used unreasonably, as in all the other powers, it could operate unreasonably. The experience of the V. and G. report, which the noble Lord is familiar with, was not so much that we do not possess adequate power to act, but that we do not operate it in time. If information is asked for, it is only too easy for a company trying to keep going when it ought not to do so, to give apparently plausible reasons for not giving information and so playing the Department along. I will see that my right honourable friend bears this point in mind, because many companies are of world-wide importance and would find a genuine difficulty here. But one has to remember that there is such a thing as original sin and it is the only doctrine of the Church that can really be established by experience.
§ Clause 18 agreed to.
§ Clause 19 [Power to obtain information and require production of documents]:
§ On Question, Whether Clause 19 shall stand part of the Bill?
§ LORD ALDINGTON
We had a debate on some of the main points about this clause when we discussed Clause 11(3) on the last occasion. If we might look at this clause in the context only of the powers in Clause 11(1) for the moment, may I ask the Government one question; that is, is it necessary to have subsection (1)?
That subsection would seem to provide for periodic inspection and handing over of information. Subsection (2) 1094 would seem to give all the powers that are required. That is the point that I would take on this clause in the context of Clause 11, subsection (1).
If in the redrafting of the Bill Clause 11(3) remains as it is, I very much hope that the wide powers in Clause 19 will not apply in those cases. The noble Earl, Lord Limerick, in the Second Reading debate and in the early part of this Committee stage, made the point that it was valuable to have a power of what I might call random inspection of any company in order to cover up or camouflage inspections made of companies whose affairs were in doubt. I have some reservations on that. But even if one accepts that, does it follow from that that the Bill must give the Secretary of State power to have a wide-ranging inspection of all the affairs of insurance companies—and there are something like 700 of them, I think—who are not at the moment subject to any of the circumstances set out in Clause 11(1)? Would it not be better to limit the power of inspection to certain important matters, one of which might be the unclaimed loss reserves? There are technical points which can be considered by the Government between now and Report, so what I am suggesting is that if in the redraft of Clause 11, subsection (3) remains somewhat as it is, the Government should in this case specify the purposes of the inspection.
§ LORD JACQUES
We believe there are situations in which Clause 19 as it stands may be required, but we also believe that there are situations where it is not required. Can I refer the Committee to Clause 11(3)? That gives the Minister power to use Clause 19 against any company, a company of long standing and repute. It is our view that the powers of the Minister in Clause 19, subsections (2) to (6) are adequate for the purposes of this particular clause, and that there is no need to use the powers of Clause 19(1) in relation to Clause 11(3).
§ THE LORD CHANCELLOR
I know from what my noble friends have just been saying to me that these points are being very carefully considered by my right honourable friend, and should either my noble friend or the noble Lord, Lord' Jacques, wish to make any additional representation to him, apart from what 1095 they have said, which will be carefully noted, my right honourable friend will take it into account. I follow what is said about Clause 19(1). On the other hand, I was not absolutely sure that I had the point about Clause 11(1) quite right. I should not have thought that Clause 11(1) was the most likely ground on which one would seek information, because if one thinks that a company is insolvent, one is much more likely to move straightaway on to one of the more draconian powers. But if one looks at some of the other grounds—misleading or inaccurate information, or failure to satisfy a particular obligation, or failure adequately to reinsure risks—I think it will be seen that Clause 19 is relevant. I should have thought it was altogether too mild rather than too extensive for Clause 11; but again, I do not want to pre-empt what my right honourable friend may put about it. I know he is considering this matter both with my noble friend and with other insurance interests. Perhaps with that, my noble friend would for the moment be content.
§ LORD ALDINGTON
I should be absolutely content if I could avoid my noble and learned friend, misunderstanding me. Clause 11(1) includes paragraph (a), which is the reason for a draconian power, and paragraphs (b), (c), (d), (e) and (f), and when I was referring to Clause 11(1) I was referring as much to paragraphs (b), (c), (d), (e) and (f). I hope my meaning is now clear.
§ LORD STOW HILL
May I raise one point, which I should describe as a civil liberties point and which the Committee may feel we should look at before passing it. Clause 19 provides that in certain circumstances answers must be given and information furnished. It is compulsive, and the person involved has no option. If one looks at subsection (5) one finds:A statement made by a person in compliance with a requirement imposed by virtue of this section may be used in evidence against him.I presume that means not only in civil proceedings but in criminal proceedings as well. I agree that without such a provision Clause 19 would be far less effective than it is intended to be and, may I 1096 add, ought to be. What I would ask the noble and learned Lord is, are there precedents for answers which have to be given, as to which the person concerned has no option, being made available as evidence against him in criminal cases? There may well be—I am not saying for a moment that there are not—but perhaps that is an aspect of civil liberties legislation which we should look at. I should be grateful if the noble and learned Lord would indicate the Government's thinking on that point.
§ THE LORD CHANCELLOR
There are precedents. The obvious precedent that springs to my mind is the Bankruptcy Act 1914. I am sure there are equally precedents under the Companies Act, of which this is virtually an amendment. I cannot see that there is any objection to using information provided by a person on that hypothesis and saying, "Now we are going to assume that this is true. This is something you said. If it was not true, you ought not to have said it." I cannot see why a man should run away on the grounds of civil liberty from the prosecution's saying in a subsequent case, "What you have said is true. If you are to deny it now, it is an issue for the jury." That is really all that subsection (5) says, even in criminal cases.
§ Clause 19 agreed to.
§ Clause 20 [Residual power to impose requirements for protection of policy holders]:
THE EARL or LIMERICK moved Amendment No. 18:
Page 14, line 28, leave out ("and potential policy holders of the company from") and insert ("or potential policy holders of the company against").
§ The noble Earl said: Apart from a minor drafting change to bring the wording of the clause into line with that used in Clause 11(1)(a), the Amendment has a similar purpose to that proposed in Clause 11(1)(a) (Amendment No. 11); that is, to permit action appropriate for the purpose of protecting either present or potential policyholders but not necessarily both. Action to protect future policyholders may in fact be different from that required to protect present ones, even where both require protection, and the Amendment will permit this. I beg to move.1097
§ On Question, Whether Clause 20, as amended, shall stand part of the Bill?
§ 8.15 p.m.
§ LORD CACCIA
This clause again refers back to the provisions of Clause 11, and as that is to be amended it is difficult to argue a special case. The clause is of an omnibus character and almost says, "Well, if we have not thought of anything that we might have thought of by which to catch people who will be a danger to the reasonable expectations of policyholders or potential policyholders"—that would be under Clauses 16, 17, 19 and so on—"let us have an omnibus clause to make quite certain that we shall be able to get them somehow or another". This form of general legislation is in itself not commendable if it can be avoided. I was wondering whether the Minister would be ready to look at it again, to see whether it would be possible to define a little more precisely what these residual powers would be used for.
§ LORD BROWN
I hope that the Minister will not look too seriously at it again. We have over 700 insurance companies, and each employs a large number of sometimes very clever people, and of a very large number of clever people there will be a proportion—let us hope a small proportion—who will spend their time busily thinking out ways and means of evading some of these restrictions, or indeed of cheating policy holders. If you do not have an omnibus clause in a Bill like this, then you simply wait until somebody finds a nice way of evading the law, and then you have to legislate all over again. This is a tiresome business with which you never keep up, as is the case with, taxation. You must have an omnibus clause to deal with extraordinary situations such as we meet when we come to a matter like this, or the matter that was debated this afternoon in this house on aircraft hijacking. Very similar sentiments were expressed all through that debate this afternoon. Because these are exceptional issues: one endangers life, and the other endangers the payments of sometimes poor people. I hope that the Minister will not take too much notice and that he will maintain the existence of this general clause.
§ THE LORD CHANCELLOR
I wonder whether the noble Lord, Lord 1098 Caccia, has reflected upon the context of this clause, which is really a safeguard, properly viewed, rather than an added danger to the incautious insurer. What we are trying to do is to avoid using the powers of Clause 12, which really are to put the company out of business. The purpose of these additional powers is to avoid using the draconian power of Clause 12, which is death to the company. If my noble friend will glance at Clause 11(5), he will see that we have provided that the general power, the residual power, contained in Clause 20:shall not be exercisable except in a case in which he considers that the purpose mentioned in that section cannot be sufficiently achieved by the exercise of the powers conferred by sections 12 to 19 below or by the exercise of those powers alone.Really the first safeguard is that you have to be satisfied that one of the grounds in Clause 11 exists, and then the grounds in Clause 11 are further restricted by the provision of subsection (5), which says that you can only use it if it is the last resort.
I would agree that if it were not for the framework of Clause 12, which is the power that already exists and that we are re-enacting, one could put forward a case of the kind which the noble Lord has been putting forward. Clause 12 is much more savage and more specific than this, and the restriction is so severe that I should have thought that, viewing the matter from the point of view from which we are viewing it now, the "stitch in time mentality" is better than the "put the company out of business" mentality. Probably it was to the advantage of a company that might be in only temporary difficulty for the Minister to have a power which, if he did not use it, might lead him to move straight to Clause 12 and either stop the whole of the business or some part of it.
§ LORD ALDINGTON
May I say to my noble and learned friend that some of this is not appreciated. It was with the idea of the power in Clause 12 being too draconian, too drastic, that Clause 20 was there to try and find something short of death to the company. I just wonder if that is the case, if that is the main purpose of Clause 20 which I take from my noble and learned friend, whether the present words in Clause 11(5) 1099 are not misleading. I had supposed that when the words were… the purpose mentioned in that section cannot be sufficiently achieved by the exercise of the powers conferred by sections 12 to 19".the power of Clause 20 was more drastic than anything in Clauses 12 to 19. Now I find that the object of Clause 20 is to produce something less drastic. If that is so, may I suggest to the Government that they might have another look at the words in Clause 11(5), and that I think would calm the fears which I have. Many of us were wondering what powers worse than death to the company could be used by the Government.
§ THE LORD CHANCELLOR
I take the very good debating point made by my noble friend. I cannot imagine anything worse than death to a company. There are fates worse than death which some of us might suffer in our bodies, but that incorporeal entity, the company, can hardly suffer a fate worse than death. I will bring my right honourable friend's attention to the point made by my noble friend, but as I read this Bill (I am afraid I had to do my homework in rather a hurry) I believe my explanation still stands in spite of this rather jolly point.
I have been listening to this debate with great interest. This Bill contains draconian powers. If you admit that they are draconian powers in parts of it, why not have draconian powers in other parts, too? I think this is a very necessary hit of clause. The Secretary of State might require a company to put its premium up, which would be a great deal better than closing it down, but I do not think the argument that such-and-such a power is too draconian is really valid, in view of the tremendous draconian powers that exist all over the Bill.
§ Clause 20, as amended, agreed to.
§ Clause 21 [Notice of proposed exercise of power under section 12]:
LORD STOW HILL had given notice of his intention to move Amendment No. 19.
Page 14, line 34, leave out ("power") and insert ("powers").
§ The noble and learned Lord said: Your Lordships will see that this Amendment stands in the names of the noble Earl, Lord Selkirk, and my noble friend Lord Diamond and in my name. I think I am the only one of the three present so perhaps I could indicate to your Lordships what would be my proposal with regard to this Amendment. I would ask leave in a moment or so to withdraw it, saying this about it. It is the first of a series of Amendments—there are a considerable number of them—which deal with a point which has already been mentioned to-day; namely the fit and proper person" point, or the "natural justice" point.
§ This Amendment is a paving Amendment to a number which follow. They are designed, as your Lordships may remember, to provide that the Secretary of State, if he wishes to declare somebody not a fit and proper person, must give reasons for his view, and also are designed to bring it about that the supposedly unfit person is to have a right of appeal. I would propose, if it would meet with the convenience of the Committee, that I would in a moment ask leave to withdraw the Amendment in view of the circumstance that the Government have undertaken to consider the matter; and I would at this stage also indicate what are the other Amendments which go with it in order that the Chair may have the knowledge when we get to those others that those Amendments, if called, would not be moved. If that would meet with the convenience of the Committee, may I give the numbers of the other Amendments involved? They are Nos. 20, 21, 22, 23, 24, 25, 26, 27, 29, 30 31, 33, 34, 35 and 47. They all go to the same points and would, if they are called in due course, either not move them or ask leave to withdraw them. Having said that, I ask leave to withdraw Amendment No. 19.
§ Clause 21 agreed to.
§ Clause 22 [Notice if proposed exercise of powers on ground of manager's unfitness]:
Page 16, line 9, leave out ("12") and insert ("20").—(The Earl of Limerick.)
§ Clause 22, as amended, agreed to.
§ Clauses 23 to 30 agreed to.
§ Clause 31 [Powers to make valuation regulations]:
§ 8.29 p.m.
LORD JACQUES moved Amendment No. 32:
Page 24, line 31, leave out ("may") and insert ("shall").
§ The noble Lord said: This clause gives power to the Secretary of State to make regulations with reference to valuation of assets and liabilities. We feel that the Government have been somewhat reluctant to use their powers. This we think was shown in the V. and G. case, and we think they should now show they intend to use their powers. Regulations for the valuation of assets and liabilities are in our view absolutely essential if we are going to avoid deception of policy holders and potential policy holders. We therefore think that there should be regulations and seek to substitute the word "shall" for the word "may". I shall probably be told that the Government could be in default the same day as the Bill was passed. If that was thought so by the lawyers, I 'think we could find suitable words to ensure that there would be regulations without the Government's being in default.
I would support the Amendment, provided that there are full consultations beween the Department and the British Insurance Association when the time comes for drafting the said regulations.
§ LORD BROWN
I, too, would support the Amendment. If a similar provision could have been made in the Companies Act with regard to the valuation of stocks, how wonderful it would have been for everybody! Unfortunately, it is not possible with different sorts of goods. But I assume that when one comes to value the assets of insurance companies, one is referring mainly to investments of one kind or another which have a public value; and there does not seem to be any reason why regulations should not be drawn up under this clause so that the valuation in the balance sheets of the insurance companies has a consistent relationship to the valuation placed on the companies by the 1102 public. This would seem to be introducing a measure of highly desirable uniformity.
§ THE EARL OF ONSLOW
I should like to support this Amendment. After all, the Committee of Lloyd's makes fairly stringent regulations as to what you may or may not have in your premium trust funds, and it would seem to me quite sensible that this sort of power should be used by the Government in regard to insurance companies because, as my noble friend Lord Hawke said, they are taking quite draconian powers over the whole insurance industry, anyway.
§ THE LORD CHANCELLOR
In spite of the pleas from almost every direction, I hope the noble Lord will not think it right to press this Amendment. I have seen acres of print expended by lawyers on the difference between "may" and "shall". "May" very often imposes a duty and "shall" does not always do so, and the consequences of not doing a "shall" are almost infinite in their permutations and combinations. Shall we have the admirable Mr. Raymond Blackburn bringing a mandamus before the Divisional Court, and going before Lord Denning if the Secretary of State is in default? This is not the way in which the regulatory powers can be used. A Secretary of State is not in the same position as Lloyd's, nor has an Act of Parliament quite the same standing as the immutable laws which Lloyd's makes for its underwriters and its brokers.
The clause would not be put into the Statute if we did not intend to use its powers, and I can assure the noble Lord who moved the Amendment that we do intend to use the powers. But it is not usual to expose a Secretary of State, or any Minister, to unnamed penalties if he does not use powers, which he has every intention of using, as soon as some people would like, and "may" is therefore essential. Moreover, if you did substitute "shall" for "may", where would you get to? I suppose that people could argue that, although he had used his powers, he had not used them up to the hilt; that is to say, there were certain powers which his critics thought were intra vires and which he thought were ultra vires, which he had therefore deliberately refrained from using within the terms of the clause. I suppose a 1103 great deal of litigation could take place about that.
I am bound to say that I have not studied this point at any great length, but I do not think I have ever seen a regulatory power of a Minister imposed with the word "shall" and not with the word "may". Although I have great sympathy with the noble Lord, and indeed with my noble friends and others who supported the sentiments which he uttered, I would think that simply as a piece of constitutional propriety we might stick to the terms of the clause. I do not think this is the moment to break utterly new constitutional ground, but I think we should be doing so if we acceded to the noble Lord's persuasion.
§ LORD JACQUES
Am I right in saying that the Government regard these regulations as necessary, and that as soon as is practicable there will be regulations?
§ THE LORD CHANCELLOR
Yes, I think that is a fair statement of the case. We shall of course have to consult with quite a number of people as soon as the Bill is passed, and the resultant regulations will be made as soon as practicable thereafter. I hope that that will satisfy the noble Lord.
The noble and learned Lord will no doubt have a few hints and tips from the Commercial Union on the valuation of liabilities.
§ Amendment, by leave, withdrawn.
§ Clause 31 agreed to.
§ Clause 32 [Approval of person proposing to become controller of insurance company]:
§ On Question, Whether Clause 32 shall stand part of the Bill?
§ 8.35 p.m.
§ LORD ALDINGTON
What I have to say really revolves around the interpretation of the word "controller". If the word "controller" in this clause is to be interpreted in the same way as the word "controller" in Clause 2, then my humble submission to your Lordships is that this clause makes nonsense of life. In effect, it requires that every year all the directors standing for re-election in a company have to submit their names 1104 for the approval of the Secretary of State and may have to wait for three months. I cannot believe that that is meant to happen, and I can only believe that the intention of this clause is to catch the real controller in the sense of somebody who has the full controlling power over the insurance company—perhaps a person as defined in Clause 2(2)(c). If that is the case, then I have no objections to the clause, but I should like to know whether that is so.
§ THE EARL OF LIMERICK
My noble friend is on to a good point. It is one which we have discussed and I think I have to concede—although I am not convinced—that his interpretation of "retiring directors" is right. But this is a matter into which we are looking and we have certainly taken on board what he has said. He is certainly correct in assuming that we are not attempting to catch the sort of case he mentioned.
§ LORD BROWN
Does not this difficulty draw attention to an omission which is much wider than this Bill; that is, the failure of industry and commerce to move to an exact definition of the terms which they consistently use? If one had the term of "chief executive", then what this Bill is aiming at is the chief executive if he is the man whom the board holds accountable for running a company within the terms of reference set by the hoard. This failure to define our terms results in its being almost impossible to draft clauses which are appropriate. I hope that the fact that there has been this difficulty will draw attention to the necessity for defining our terms in future—not that I suggest doing it in this Bill.
§ LORD ALDINGTON
With respect to the noble Lord, I very much hope that the Government will not take any notice at all of that suggestion. I do not think it is the fault of industry; I think it is the fault of the drafter of the Bill in using a word which is specially defined in this Bill to catch much too wide a net of people. That is all that has gone wrong. I do not think this clause is at all aimed at what is called the chief executive: I think it is aimed at somebody who has even greater power than the chief executive. Chief executives, as I understand the Companies Act, are responsible 1105 to their boards of directors, and their boards of directors have responsibility under this Bill and under the Companies Act to all kinds of people. I think the controller" here is meant to be the person mentioned in Clause 2(2)(c). If I am right about that, then I have no objection to the clause.
§ Clause 32 agreed to.
§ Clause 33 agreed to.
§ Clause 34 [Documents deposited with Secretary of State]:
THE EARL OF LIMERICK moved Amendment No. 36:
Page 26 line 21, leave out from ("under") to end of line 22 and insert ("section 8 of the Act of 1958, including any document obtained under subsection (2) of that section;").
§ The noble Earl said: This Amendment makes no change to the substance of the Bill. It merely clarifies the drafting for the purpose of facilitating consolidation which, it is hoped, can be arranged soon after the Bill is enacted. I beg to move.
§ On Question, Whether Clause 34, as amended, shall stand part of the Bill?
§ LORD ALDINGTON
There is a very short point here which has been taken earlier. It relates to the desirability of publicity in all circumstances. My noble friends have stressed the importance of the Government having power to do things in such a way that they do not provoke immediate disaster for the policy holder and the insurance company. Immediate publication of certain documents in certain events might provoke exactly that disaster which my noble friends on the Government Front Bench have told us on many occasions they wish to avoid, so I wonder whether they might look again at the drafting of subsection (2), or indeed at the drafting of the whole of this clause, to ensure that publicity is not mandatory in those sort of circumstances.
§ THE EARL OF LIMERICK
Certainly we will look at the point which my noble friend has raised. I would just point out that the Secretary of State is not bound to make public the information which he gets under Clauses 6(5) and 7(2), but he has a discretion to do so. The extent and the form of the publicity will be among 1106 the matters for consideration with the industry when the contents of the regulations to be made under those two clauses are discussed with them, and of course we shall have regard to our watchword "Freedom with publicity", which involves a certain amount of publicity to justify the freedom.
§ Clause 34, as amended, agreed to.
§ Clause 35 [Treatment of certain business as or as not being ordinary long-term insurance business]:
THE EARL OF LIMERICK moved Amendment No. 37:
Page 27, line 19, after ("27") insert ("(4) to (6)").
§ The noble Earl said: This is a purely drafting Amendment to remedy the inappropriate inclusion of irrelevant subsections!that is, subsections (1) to (3) of Clause 27—in Clause 35 (4), which, as amended, will still refer to the other subsections of Clause 27; that is, subsections (4) to (6). I beg to move.
§ On Question, Whether Clause 35, as amended, shall stand part of the Bill?
§ THE LORD CHANCELLOR
Perhaps I may take this opportunity to say that I made a passing reference to Lloyd's in reply to an argument put from behind me, and I ought perhaps, before doing so, to have disclosed that I am a name at Lloyd's. The Bill does not affect, it, but it does occur to me that, having referred to the matter, I should perhaps have disclosed it.
§ Clause 35, as amended, agreed to.
§ Clause 36 [Power to modify Acts in relation to particular companies]:
§ 8.45 p.m.
THE EARL OF LIMERICK moved Amendment No. 38:
Page 27, line 37, after ("27") insert ("(4) to (6)").
§ The noble Earl said: This, again, is purely a drafting Amendment, similar 1107 to the last, to remedy the inappropriate inclusion of irrelevant subsections—that is, subsections (1) to (3) of Clause 27—in Clause 36(4), which, as amended, will still enable modifications to be permitted for individual companies in relation to the remaining subsections of Clause 27; that is, subsections (4) to (6). I beg to move.
§ Clause 36, as amended, agreed to.
§ Clause 37 [Application of Acts in relation to industrial assurance business]:
THE EARL OF LIMERICK moved Amendment No. 39:
Page 27, line 43, leave out ("and sections 5 and 7") and insert (",section 5 of that Act so far as it relates to the form of abstracts and statements and section 7").
§ The noble Earl said: This is a somewhat recondite point, but I think I can explain it briefly. Under Section 5 of the Insurance Companies Act 1958 the triennial valuation of industrial assurance companies has to be made by an actuary with prescribed qualifications, and in that context "prescribed" means prescribed by regulations made by the Industrial Assurance Commissioner. But the business of industrial assurance companies need not be confined to industrial assurance business, and in practice all or nearly all such companies also carry on ordinary long-term business. There therefore seems little merit in excepting industrial assurance companies from the general rule that, as insurance companies, they should have actuaries with qualifications prescribed by the Secretary of State. The Amendment has the effect of conferring on the Commissioner the power to prescribe under Section 5 the form of valuation abstracts and statements, but leaves with the Secretary of State the power to prescribe the qualifications of actuaries. I beg to move.
§ Clause 37, as amended, agreed to.
§ Clause 38 agreed to.
§ Clause 39 [Insurance brokers]:
§ The noble Lord said: Clause 39 is concerned with regulations controlling insurance brokers, and again we have the question whether it should be "may" or "shall". Can I assume that the Government regard these regulations as necessary, and will make such regulations as soon as practicable? If so, I shall beg leave to withdraw the Amendment. I beg to move.
§ THE EARL OF LIMERICK
I am able to give that assurance to the noble Lord, comparable to the one given on the previous Amendment, Amendment No. 32.
§ Amendment, by leave, withdrawn.
THE EARL OF LIMERICK moved Amendment No. 41:
Page 29, line 21, leave out from first ("to") to ("and") in line 23 and insert ("make an offer or proposal or to take any other step with a view to entering into a contract of insurance with an insurance company;").
§ The noble Earl said: The present wording of Clause 39(1)(a) is inadequate, in that it does not take account of the many forms of preliminary action which may lead to the conclusion of an insurance contract. For example, in some cases the form or proposal completed by a potential policy holder, or perhaps by a broker on his behalf, may constitute an invitation to the insurance company to treat, rather than itself constituting an offer to the insurance company. The amended wording is so framed as to cover any conceivable arrangement involving an intermediary leading up to the possible conclusion of an insurance contract. I beg to move.
LORD JACQUES moved Amendment No. 42:
Page 29, line 27, after ("connection") insert ("and to other matters").
§ The noble Lord said: We on this side of the Committee are concerned not so much with the agent who is a full-time member of the staff of the insurance company, but with the insurance broker who acts for several companies and with the part-time agents such as the garage proprietor who is in a strong position to get business and whose main concern is not insurance. It is here that some control is necessary. There are many cases where a youngster goes to a garage 1109 and eventually buys a car. The garage proprietor says to him, "Now you will want insurance. You cannot go on the road without insurance. We can fix that up for you right away". Then they produce their proposal form and encourage the youngster to fill in the form. Then lie gets stuck halfway down and says, "What shall I say about this?". "Oh", they say, "Say Yes! If you say 'No' there will be a delay". Later he may have an accident and as a result of the advice given to him by the part-time agent he has given false information. In consequence he has no claim. We cannot see the great importance of disclosing connection; because everybody knows that the chap at the garage or the insurance broker has a connection with the insurance company and is getting a commission and that otherwise he would not be bothering about insuring the client.
§ THE EARL OF ONSLOW
May I interrupt? I think it should be made quite clear that insurance brokers are agents of the insured and not of the insurer. If the noble Lord, Lord Jacques, goes to an insurance broker, that broker is acting as his servant and not as the servant of the insurance company. I am sure the noble Lord understands that, but what he said could have been misconstrued.
§ LORD JACQUES
In the context of what I am saying, this is a purely technical point of law which makes no difference to the ultimate consequences. It is the ultimate consequences that count. Therefore, so far as connection is concerned we do not see a great deal of importance in that. We have no objection to its being disclosed; but everybody knows that the chap encouraging the insurance to be entered into is acting for the company and is going to get paid for so doing. What is far more important is that he should disclose to the potential policy holder the consequences of false information on the proposal form, what are the consequences of non-disclosure and what are the terms of the offer which is now to be made to the insurance company. These are the things that should be disclosed. Consequently we have suggested that in addition to "connection" there should be added "and to other matters", thus giving the Secretary of State power to deal with other matters in 1110 these regulations and to ensure that there is this kind of disclosure by the insurance broker. I beg to move.
§ THE EARL OF LIMERICK
The noble Lord, Lord Jacques, has raised an interesting point and has given some examples about which I should like to think. Basically, the question, not an easy one to resolve, is this: how much of this information should be given other than in the policy itself, which is the document of contract? I should like to consider whether it would be helpful for policy holders to prescribe this other information separately from the policy. I have another reason for asking the noble Lord not to press the Amendment at this moment. We hope shortly to receive recommendations from the Committee under the chairmanship of Sir Hilary Scott which is examining equity linked life insurance. It may be that some of these recommendations will be dealt with by Amendments to Clause 39. Bearing in mind what I have said and that I am willing to talk about the matter. I hope that I may ask the noble Lord not to press his Amendment at this moment.
§ LORD JACQUES
We still hope that the Secretary of State will take this power. That is all that this Amendment would do; it would add words to give the Secretary of State additional power to ensure that the prescribed disclosure is not only about "connection" but about "other matters" at the discretion of the Minister. With the assurances that have been given, I beg leave to withdraw the Amendment.
§ Amendment, by leave withdrawn.
LORD JACQUES moved Amendment No. 43:
Page 29, line 27, at end insert—
("() Regulations under this section may require the keeping by an insurance company of a register of persons so connected and may prescribe the information to be entered on it.")
§ The noble Lord said: Here we suggest that there should be regulations requiring an insurance company to keep a register of the persons so connected and the Secretary of State may prescribe the information to be entered in it. We believe that this would be one way of weeding out those people who act between the insurer and the insured and who are not the kind of people who ought to be doing that. If there is a register it would help 1111 a great deal. The burden of keeping the register should not fall upon the Government Department but upon the insurance company who use the agent or broker. I beg to move.
This may be a very worthy Amendment. I am sure that most insurance companies must have a list of their agents; but the Amendment does not appear to me to say what is going to happen to the record when it has been prepared. It will not be of much use unless the general public are to have access to it.
§ THE EARL OF LIMERICK
Again I find myself in sympathy with the point put, although my noble friend Lord Hawke has voiced one of the doubts which I have about it. I think that this proposal could usefully reinforce our disclosure requirements. I am grateful for the noble Lord's welcome concern not to overload Government Departments. Following my noble friend Lord Hawke, I wonder whether the register kept in the company office would be of sufficient help to the public. What I should like to consider is whether the information to be recorded on that register should be deposited with the Department, perhaps on an annual and not on a "blow-by-blow" basis, so that a copy could be put on the company's file for general information. That would call for the Amendment to be redrafted, which I think it needs in any case. I would therefore ask the noble Lord not to press it at this stage.
§ LORD JACQUES
I gather that the Minister is not only in sympathy with the Amendment but wants to carry it a little further. In that case I have pleasure in asking leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Clause 39, as amended, agreed to.
§ Clause 40 agreed to.
§ Clause 41 [Validation of certain group life policies]:
THE EARL OF LIMERICK moved Amendment No. 44:
Page 30, line 2, after ("lives") insert ("or other event or events").
§ The noble Earl said: This is a minor drafting Amendment, associated with the 1112 Amendment to the Long Title of the Bill (Amendment No. 58), to make clear that Section 2 of the Life Assurance Act 1774 extends to certain group non-life policies as well as to certain group life policies. The Amendment in no way affects the substance of Clause 41(1) which, as it stands, already applies to non-life policies. I beg to move.
§ Clause 41, as amended, agreed to.
§ 8.58 p.m.
LORD STOW HILL moved Amendment No. 45:
After Clause 41 insert the following new clause:
§ Repudiation of liability
§ ".Notwithstanding any rule of law to the contrary, an insurance company shall not be entitled to repudiate liability on a policy of insurance on the ground that the policy holder or any other person who effected the policy failed to disclose a fact or facts material to the assessment of the risk covered by such policy, if the policy holder or such other person, as the case may be, reasonably regarded such fact or facts as not being material to the assessment of such risk."
The noble and learned Lord said: The object of this Amendment is to give effect to what I think I can rightly describe as the principal proposal of the Fifth Report of the Law Reform Committee which was published as a White Paper in 1957. I think I should describe it as a tentative proposal because, if I may quote from paragraph 12 of the Report, those who sign it say this:
It does not, however, seem to us that the mere fact that a branch of the law is theoretically open to criticism, or even that it is susceptible of abuse, in itself justifies a positive recommendation that it should be amended.
In the light of that, they do not actually recommend the change proposed in the Amendment which I put forward, but to use their language they say:
We think that any or all of the following provisions could be introduced into the law and that no legal difficulties would arise in their application—".
They then go on to make the first of the recommendations with which I am concerned in this Amendment and which I will in a moment read to the Committee.
§ I am emboldened to make this proposal because the Committee which prepared the Report was composed of extremely distinguished members: lawyers who occupied the highest position on the 1113 judicial bench, and lawyers of very great distinction in the academic field. Many were Members of your Lordships' House, those whose names I will now read out. The late Lord Jenkins; the late Lord Parker, the Lord Chief Justice; the noble and learned Lord, Lord Devlin; the noble and learned Lord, Lord Diplock, and my noble and learned friend Lord Gardiner. They were all members of that Committee with other distinguished persons highly thought of in the academic field.
§ The Amendment deals with what is known as the doctrine of non-disclosure of material facts. To the extent that the law requires to be changed I must plead guilty to having raised the defence on innumerable occasions on behalf of insurance companies; and certainly on occasions I earned a rather severe look down his nose from the late Lord Goddard, who had rather strong views on this defence and who did not altogether approve of the advice that he thought I must have given to my clients—generally he was right. If I may seek to state the doctrine it is as follows. It is always said that the law of insurance is the law which requires the maximum good faith on the part of both the proposing insurer and the insurance company or the underwriter. As a branch of that law, it has been clearly formulated in the authorities that the following is the position: if the proposing insurer knows of a fact and the insurance company is ignorant of that fact, the proposing insurer is bound to reveal it, without being asked, to the insurance company, if it is a fact which would influence an ordinary prudent underwriter in assessing the risk which is proposed. The Committee may think of dozens of cases in which that sort of situation might arise.
§ In a large field of insurance law it does not arise in a practical form because the proposing insurer is required to fill in a proposal form in which he gives answers to the insurance company on matters they ask about in the form. Sometimes it is held that if he fills in the form the insurance company waives its right to be informed of other material facts which the proposing insurer knows of. But that is not of universal application and, broadly speaking, I think it is accurate to say that whether or not there is a proposal form the proposing insurer 1114 remains under that duty. If he knows of a fact which is material in assessing the risk he must, without being asked, disclose it to the insurance company whether or not he thinks, reasonably or otherwise, that it is material. He may think that it has absolutely nothing to do with the risk; nevertheless, if a prudent underwriter would say to himself, "This affects the character of the risk I am being asked to underwrite", and if the proposing insurer does not disclose that fact, the underwriter can, when he gets knowledge of the fact!perhaps after a loss has occurred—repudiate liability on the policy.
§ One must try to take a fair view of this matter. On the one side there is the proposing insurer who has knowledge of a fact which he does not know is material, and reasonably does not think that it could be. On the other hand one has the underwriter or the insurance company who, if told of the fact, would certainly think it material in that it would influence the premium or his judgment as to whether he would accept the risk at all. He might refuse it. Standing apart from that position one has to be fair to both sides. The loss has to fall on someone. Should it fall on the proposing insurer or on the insurance company? Suppose a loss does occur in respect of a risk which the insurance company would not have accepted at all had it known of the fact, but it was a fact which the proposing insurer did not think could possibly affect the risk. Who is to bear the misfortune? Is it to be the proposing insurer or the insurance company?
As the law stands at the moment, it is the proposing insurer who has to bear the loss. The underwriter or insurance company, when he or it acquires knowledge of the fact, can repudiate the policy. That may frequently happen—indeed it nearly always does happen—after a loss has occurred. In consequence, the proposing insurer has to bear the loss. He may be turned out of his house and home; it may be a heavy loss and a terrible misfortune to him. What does Justice really say in a matter of that sort? I hope I have got it right; I think I have. If I may quote from the Report it seems to confirm me:
The effect of non-disclosure may be considered first, since it is a consequence of the
general law relating to insurance contracts and does not involve any express term or condition. We take it to be well settled law—(a) that the duty of disclosure of material facts … applies to all classes of insurance and, (b) that the question in every case is whether the fact not disclosed was material to the risk, and not whether the insured, whether reasonably or otherwise, believed or understood it to be so.
The Report goes on later to say:
The practical effect of the law on this point is that insurers are entitled to repudiate liability wherever they can show that a fact within the knowledge of the insured was not disclosed which, according to current insurance practice, would have affected their judgment of the risk. Whether the insuring public at large is aware of this it is difficult to say; but it seems to us to follow from the accepted definition of materiality that a fact may be material to insurers, in the light of the great volume of experience of claims available to them which would not necessarily appear to a proposer for insurance, however honest and careful, to be one which he ought to disclose.
I should add that they considered a number of other things such as arbitration clauses, proposal forms and so on. They then summarised their conclusions in this way in paragraph 11 of their Report:
It appeared to us that such a state of the law, combined with the prevalence of such terms and conditions in insurance policies as we have described in the preceding paragraphs, is capable of leading to abuse, in the sense that a variety of circumstances may entitle insurers, after a loss has occurred, to repudiate liability as against an honest and at least reasonably careful insured. Material was available to us, in the form both of reported cases and of instances within the experience of those who supplied us with information, which showed that such abuses had in fact sometimes occurred. It was forcefully represented to us by those representatives of insurance interests who submitted memoranda or gave oral evidence that no reputable insurer would rely on a purely technical defence to defeat an honest claim. This may well be true, and we think that in general it is true, but it does not alter the fact that the ease with which a technical defence may be found means that in many cases an insurer is in a position to substitute his own judgment of the claimant's bona fides for that of the court.
§ If I may quote from my own experience, perhaps I may say that over many years of this class of litigation I always found that insurance companies were extremely jealous of their reputation. If the question whether a defence of nondisclosure (as we used to call it shortly) should be raised or not, got to (shall I say?) the policy-making section of the 1116 insurance company, they were extremely careful not to raise it if it could possibly be said that to raise it would in the circumstances be unconscionable. That I always found to be the case.
§ On the other side, I sometimes found that you might get a claims manager a long way from London, a long way from the board and a long way from senior executives, faced with a fairly small claim. He might perhaps have more regard to the individual case and less to the reputation of a large insurance company, and it never reached great heights and nobody knew about it; whereas if persons higher in the ranks of the insurance company had known about it they would have strongly repudiated the idea that any such defence should be raised.
§ Quite apart from that, with the best will in the world there are always cases as to which it is extremely difficult to say: Would it be conscientious in this case to raise the defence, or would it not? Often insurance companies came to counsel (for which I was extremely grateful to them), and often they got bad advice, I am sure—and I speak from experience; occasionally I received a reproof from the late Lord Goddard, who looked severely at me on occasions. Both sides, certainly counsel, did their best to see that a defence was raised only in a case where it could be properly raised. Unfortunately, opinions differ. In a given case, an honest insured might think it would be monstrous to raise it; and in the same case, equally honest insurers, including their counsel, might think it right and sensible that it should be raised. I sometimes felt that the insurance company did sustain harm. Their reputation was not served well on occasions when that sort of defence was raised, and perhaps it would have been better, on reflection, not to have raised it. But it is difficult to accuse those concerned. These questions are difficult matters of discretion and judgment, and both parties are trying to deal with the matter honourably, one with regard to the other. I certainly plead guilty in the matter; I am not trying to exculpate myself in the least.
What the Committee in those circumstances say in the form of their tentative proposal is
We think that any or all of the following provisions could be introduced into the law
and that no legal difficulties would arise in their application—
(1) that for the purposes of any contract of insurance no fact should be deemed material unless it would have been considered material by a reasonable insured.
In formulating this Amendment (my drafting is very imperfect) I have tried to give precise effect to that proposal. Your Lordships will see that I say that, notwithstanding any principle of law, an insurance company is not to be allowed to repudiate liability on a policy of insurance on the ground of non-disclosure—and these are the material words:
if the policy holder … reasonably regarded such fact or facts as not being material to the assessment of such risk".
That, I think, would follow what the Committee recommended; and I would submit that it is fair.
§ One is really asking the question: where should the loss fall? Take the case, for example, where an insured person did not disclose some fact within his knowledge but reasonably said to himself—and I emphasise the word "reasonably"—"This obviously has nothing to do with it; it cannot possibly influence the nature of the risk." Where that is the situation, if a loss occurs and the insurance company gets knowledge of the fact that is not disclosed, in those circumstances they shall not be entitled to repudiate the policy. I hope that is a fair approach, and I am the more emboldened to put it before your Lordships because it emanates from this distinguished Committee. It is not simply my own idea, though I am bound to say that it accords with my own experience of these matters.
§ That is the proposal I have to make to your Lordships. I thought it right to propose it in the form of an Amendment to this Bill, which is designed generally to amend the law relating to insurance. Therefore it seemed not inappropriate to look at the recommendations which were formulated by this Committee some years ago and seek to embody by way of an Amendment what I think is the most important of their proposals. Certainly it is the least complex. The others, dealing with arbitration clauses and so on, are more complex and would not perhaps fit well within the context of this Bill. But this is a separate and distinct branch of the law which it has been thought—and I use those words 1118 deliberately in the light of the Report—is susceptible to change, and could be changed with advantage. Those are my reasons for proposing this Amendment, and I beg to move.
§ THE EARL OF ONSLOW
I very much hesitate to disagree with the noble Lord, Lord Stow Hill—he is far too clever for me to try that on—but one could say that there are rogues in the insuring public as well as a few rogues in insurance companies, and I should have thought that this Amendment would have given some people quite large opportunities for a little bit of fiddling. Secondly, as the noble and learned Lord, Lord Stow Hill, says, the vast majority of insurance companies do not use the excuse of non-disclosure unless there is a very sound reason behind it, and there is almost always a suspicion of something else as well. Thirdly, perhaps going a little way towards agreement with the noble Lord, where a contract of insurance is entered into the forms of proposal could have on them some more detailed clause or question, pointing out the advantages and disadvantages of the doctrine of utmost good faith and of the disclosure of facts.
I think this Amendment is of the most glorious metaphysical character, and we could argue it until midnight, if we all had a go at it, but it seems to me that a great deal turns on the interpretation of the word "reasonably". It is perfectly possible to have grave doubts whether it is reasonable for a person to have made a disclosure or not to have made one. A very typical instance would be that of a person who has insured his house and subsequently has installed oil-fired central heating. He might not think it made the slighest difference to the risk, but the underwriter might say to him, "My experience of houses with oil-fired central heating is that they burn more easily than those that have not got it"—something like that. On whom is the burden of proof as regards what is reasonable? Has the insurance company to prove that it was unreasonable of the insured man to withhold these facts, or must the man prove that it was very reasonable of him to withhold them? I do not know whether the Department has had any discussions with the interests concerned outside this House on this particular matter, 1119 but I would humbly suggest that the noble Lord might withdraw his Amendment and my noble friend might take some counsel with the people who run the industry, to see whether it is practicable to do something of this nature.
§ LORD ALDINGTON
I almost hesitate to disagree with, and certainly to contradict, anything the noble Lord, Lord Stow Hill, may say to your Lordships on a matter of law, arising from his considerable experience in practising it. I think he would agree, however, that if he is going to alter the law he ought to alter it not only for insurance companies but for all insurers. Perhaps this Bill might not he the right place to do that. On the main point, one must be affected in one's judgment by the fact that a formidable body of lawyers—some of them no longer with us—of well-earned reputations known to your Lordships should reach this conclusion in 1957. One must weigh that up carefully in the balance. One must also weigh up the fact that though they reported in 1957, the pressure to implement that Report has not been very great, and that successive Governments over this considerable period of years—nearly 16 years—have not thought it right to proceed, and one can see why from the remarks made by both my noble friends who have just spoken.
One must realise and accept from the noble and learned Lord that sometimes this defence—because I think this is the evidence he gave to us—has been used in a way in which he and the friend of many of us, Lord Goddard, did not like. If that is so, anybody who was responsible for the company in those circumstances would regret it. From the experience I have of hearing about these things, my own feeling is that great care was taken before this defence was pleaded, and that it was pleaded only in cases where something material was not disclosed which would have affected the assessment of the risk. If that is pleaded in front of the court as such, I should have thought that gave the insured person a good safeguard. What the noble and learned Lord is proposing is to go a little further than that and turn it round from what might be reasonable for the assessment of the risk, to what an insured person, or a proposer for insurance, might at that time think is reasonably material 1120 for the assessment of the risk. That is the change. It is a small change apparently, but it might have the most devastating, effect—and this I have not had time to think out or seek advice upon—on the assessment of risks in the future. It is reasonable that we should all think about it further. It is also reasonable—and this I put to your Lordships—that a change of the law of this importance, affecting all insurers, not just insurance companies, might be better made in some other Bill than a Bill which is specifically confined to insurance companies.
§ 9.24 p.m.
VISCOUNT COLVILLE OF CULROSS
My Lords, if there is one thing that I agree about it is, as the noble and learned Lord, Lord Stow Hill, put it, that this is something upon which we should take counsel and, for all I know, counsel's advice. And as my noble friend, Lord Aldington, put it, it is something we should think about. The situation is this. The Department does not have the same richness of evidence and experience that the noble and learned Lord, Lord Stow Hill, enjoys. If one looks at the whole of the Report which came out in 1957 and to which he referred, one sees in paragraph 10 that this very distinguished body said that the legal interpretation of this particular point had been obscured and, indeed, occluded by the inclusion of these arbitration clauses which had prevented most of these cases coming to court in recent years. The Report then made the points in paragraph 11, the whole of which he read out but which, as I understand the Report, do not necessarily relate to the particular matter to which this Amendment goes, because there were three points in their recommendations. I do not know what material was available to them and I do not know how much of it went to this particular one of their three points. They then went on to say, in paragraph 13, that there was a new régime which had then come into existence whereby the arbitration clause was to be outlawed and they hoped, therefore, that these matters would get back to the courts, where I think on a point of this sort the argument really belongs, rather than in the arbitration tribunal.
About the same time there was an equivalent inquiry in Scotland which published a Report as Command Paper 330, and that one said—and I think the law 1121 on this point is probably the same in Scotland as it is South of the Border—that they did not find there was anything particularly wrong on this point. If one looks at paragraph 35 of that Report one can see that. What I do not know, and what I do not think anybody knows, is what has happened since this new arrangement between the British Insurance Association and Lloyd's to get rid of the arbitration clauses, and we do not know what the effect of it has been. With great deference to the noble and learned Lord, Lord Stow Hill, I believe that the time when he was doing the sort of cases to which lie referred us was a little while ago, and probably not since a new arrangement about arbitration clauses was entered into. Certainly the Department has not had many complaints about it since that time.
I know the two conflicting points of view and I think they must be very carefully balanced. On the one hand, you have the branch manager who takes this bad point when he ought not to, as the noble Lord described it. I think there is also the point raised by my noble friend Lord Onslow that this defence may be the last resort of an insurance company which is otherwise liable to be "taken for a ride" by someone even though they cannot in any other way prove it. These are two extreme points of view. Somewhere in the middle we have to get a balance between the interests of the insured not to have the liability suddenly repudiated for reasons which he thinks are unjust, and the insurance company or the insurer in general—because I take the point made by my noble friend Lord Aldington—who ought to be informed of the things they have discovered from long experience are relevant to the assessment of risk, even if the person who is proposing himself for insurance has no idea whatever that these things have been discovered and are relevant.
In the circumstances, it therefore seems to me that I must take this point of view and suggest this to the Committee. For a long period of time this doctrine of maximum disclosure or complete faith—and we must avoid the dreadful Latin phrases—has been built up by the courts (judge-made law) and the Report describes what the latest stage of it is. I have enormous faith in the courts and judges of this 1122 country to continue to develop the law in such directions as will bring general justice, and unless there is some indication that the law has got stuck in such a way that it is causing injustice I would hesitate to introduce legislation—and I have at the moment no information to suggest that the law has got stuck. I am quite prepared to receive such information and the Department will be delighted to be told of any circumstances where this has gone wrong. We should very much like to know of cases which have been settled; and we could no doubt be told in confidence about these because people might not wish to disclose the whole thing. But I think the burden of proof for putting this in the Bill must be on those who wish to do so. In fact, on the noble and learned Lord, Lord Stow Hill, who, with all the experience that he had when he was a distinguished practitioner at the Bar, could with advantage give us some more up-to-date information, if he is able to do so. Because that was what deterred the Law Reform Committee in 1957 from being more positive. They did not know what the effect of the new arrangement would be. They did not say that this ought to be done; they merely said in the end that it would be a possible and feasible change but not one that they actively recommended.
This is an early stage of the Bill and I am sure that it is right to consider this point. I do not know whether the context is altogether correct, but I do not wish to discourage discussion for that reason. What would be most helpful to the Department would be to have the up-to-date experience and advice of those who work in this field, and if we could have some of that we could see the extent to which there is a mischief here and whether it is a mischief which is so severe that it ought to be cured by legislation. Would the noble and learned Lord accept that invitation and see if he can provide us with some more up-to-date material? He will forgive me if I say that his material was from about the time of this report. Could my noble friend Lord Aldington think about it, and also my noble friend Lord Onslow, to see whether they have instances of this going wrong, and then could we come back to it with this fresh information and discuss it, if your Lordships wish, at the next stage of the Bill?
§ LORD STOW HILL
As the mover of the Amendment, I believe that I do not infringe your Lordships' rules if I address your Lordships again. I am most grateful for what the noble Viscount, Lord Colville of Culross, has said. I wish I could disagree with him when he said that it is a long time ago that I had anything to do with it. Unfortunately it is years and years ago, and I wish that were not true. The relevance of that remark is that, while I shall do everything I can possibly do to help, I do not think that I have sources from which I can cull more up-to-date information. I rely very much on the Report. It is a most difficult branch of the law. I do not put this proposal forward in any sense dogmatically, I hope. It is very difficult to try and devise a just system for answering the question, "On whom should the loss fall?" I ventured to declare a personal interest when I last addressed your Lordships on this matter, as a person extremely well disposed to insurance companies and having had a great deal to be grateful to them for. I add to that that possibly I am being of some slight assistance to them, because I think on occasions—and I emphasise "on occasions"—that sometimes harm was done to them when defences of this sort were raised which, on reflection, might better not have been raised. I do not seek to exonerate myself. I was in with them and I constantly raised such defences as seemed open to them. But the difficulty is that one gets a kind of ground on which it is difficult to say where the right lies? Should one raise or not raise a defence of non-disclosure? Insurance companies have been regarded by too many people for years as "fair game" and they are rather like the French adage:Cette bête est méchante—quand on l'attaque elle se defend.One can sympathise with them, and I do sympathise with them. I put the proposal for consideration. I absolutely agree with the noble Viscount that this is a matter which one should not rush into. I would not have ventured to put it before your Lordships had it not been considered in the Report, written by such very distinguished members. I hope that I have achieved some useful object if I have given some ground for people to reflect on this matter and to see whether there 1124 is some useful approach and whether the time has come (in spite of what the noble Viscount said about the lesser use of the arbitration clause) for some change to be made. I do not assert or deny. I do no more than put the proposal for consideration before your Lordships as this is a Bill to amend the law of insurance and as one has had that very distinguished Report lying on the table now for many years past it seemed that it should be resurrected and considered. In saying that I am in a difficulty about furnishing up-to-date information, that of course is true, but anything I can possibly do to help in resolving this problem I shall be only too delighted to do. Having said that, may I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ 9.36 p.m.
LORD JACQUES moved Amendment No. 46:
After Clause 41, insert the following new clause:
§ Forms of policy
§ ".—(1) Regulations may be made prescribing forms of policy which shall be applicable in the case of such class or classes of insurance business as may be prescribed in the regulations, and it shall he the duty of insurance companies carrying on insurance business of that class or those classes (except in the case of such insurance companies as may be excepted by such regulations from the application of this section) to issue policies in that form to all persons proposing for such insurance at such rates of premium as are reasonable in relation to the risk covered by such policies:
§ Provided that no insurance company shall be under a duty to issue such a policy to any person or persons proposals from whom for policies of insurance in a form normally issued by such insurance company in relation to such class or classes of insurance business apart from this section would not have been acceptable by such insurance company at rates of premium applicable normally in accordance with the rates of premium ordinarily charged by that insurance company in relation to a policy of insurance issued by that insurance company in that form, and
§ Provided also that no insurance company shall by virtue of this section be under a duty to insure risks under policies in a form so prescribed which in the aggregate exceed the reasonable scope and capacity of the insurance business carried on by that insurance company, no account for this purpose being taken of policies of insurance issued by that insurance company in a form normally issued by that insurance company apart from this section in relation to the class or classes of insurance business in relation to which a form or forms of policy are prescribed by such regulations.1125
§ (2) If an insurance company wilfully makes default in carrying out the duty imposed on such insurance company by virtue of this section, the Secretary of State shall have power to withdraw the authorisation issued in relation to that insurance company under the provisions of section 61 of the Act of 1967."
§ The noble Lord said: May I point out in the first place that this Amendment is a purely enabling clause. In fact, we do not use the word "shall"; we use the word "may". It is an attempt to give the Secretary of State powers to consult with the industry and, having consulted with them, to frame regulations which would provide for some standard forms of policy which would be offered by the companies in addition to any other policies they wish to offer on the given risks. We have in mind standard forms which would give a well defined cover against familiar risks. For example, we would suggest experiment in the first place with the standard household policy, which would be comparatively simple. It would avoid policy holders finding they are not covered because they had not read the small print, or, as often happens, they had in fact read the small print but had not understood what it meant. The policy holder would know what he was going to get, and each company could charge its own rate of premium for the particular policy. That would make it very clear how far there was competition. If the companies were all charging the same rate of premium for the standard policy, then it would be clear that there was little difference between them.
§ This is not introducing a new element into consumer protection. Over the years it has been necessary for Parliament to lay down, for example, that many goods shall only be sold in certain units of weight, sometimes in units of, say, eight ounces, so that the manufacturer could not put up a package which had only seven ounces in it and deceive the public by pretending that it was an eight-ounce package that was being bought. The distinction between different policies covering the same risk is far harder to detect than the difference between a seven ounce package and an eight ounce package. In many cases you would in fact require a lawyer to tell you the precise difference between a policy offered by one company and a policy offered by another company. Consequently, we feel that if ever there was a field where this kind of simplification was needed, to en 1126 able the customer to make reasonable comparisons, and having made comparisons to make the choice, it is the insurance field.
§ We would admit that there are some difficulties in drafting legislation for this purpose. The noble and learned Lord, Lord Stow Hill, has been kind enough to draft the Amendment before the Committee, and it may be that he will wish to add to what I have said. We hope that the Government will see an opportunity here for experimenting with consumer protection in this field of insurance. We believe it could well be done in the case of some risks, particularly the household risks, and we hope, therefore, that this will receive sympathetic consideration. I beg to move.
VISCOUNT COLVILLE OF CULROSS
The noble Lord, Lord Jacques, cannot help but receive sympathetic consideration after that speech. I recognise the very substantial point of consumer protection in what he has put forward. My trouble is that I shall have to have a tutorial from the noble Lord, Lord Stow Hill, on some of the arcana of the drafting because there are bits of this that frankly none of us has altogether fathomed at the moment. I am sure there is nothing wrong with it, but we have been rather "thick" on this side of the House, and I will come to it in a moment.
The idea of an experiment in this seems to me to be a very sensible one, but whether it should be done by means of regulations and the whole machinery of government or not seems to me to be another question. It is comparatively simple, is it not, to take the case that the noble Lord, Lord Jacques, took about a house, the ordinary house, and the householder who wants insurance from the house burning down, who wants insurance from people breaking in and stealing things inside, from the roof blowing off in the wind and from something being dropped by an aeroplane and going down the chimney. There are one or two other things I have not for the moment thought of, but they are a familiar type of risk. When one gets to that stage, one thinks "Fine, it must be possible to invent a perfectly simple set of conditions with no appreciable small print at all."
My mind goes back to the autumn of 1969, when in the village just across the 1127 county border in Norfolk from where I live, there were a number of what I would consider to be very ordinary, pleasant, simple houses, some of which were built on the rising land and some of which in fact had been built on what used to be the estuary of the River Waveney. But this river had been embanked in the sixteenth century and there were sea walls. Normally speaking, this was a perfectly good field, and the water level was well below anything to do with the houses. Bnt, unfortunately, as your Lordships may remember, it rained rather a lot and there was a most mammoth flood and the water got out of the river. There are many other examples of this sort—I simply take one from personal experience.
How does one deal with the exceptions, the particular points that, in the case of an individual property, have to be covered, or the things the individual householder does not want to have cover for some reason? How does one deal with these in the standard policy? What I am afraid of is that although you put down the ordinary risks and the ordinary coverage in a perfectly simple form, in order to be universally applicable, and deal with any situation, with any sort of house in any particular place, the owner of which might want to take advantage of the standard policy, you would have so many exceptions and qualifications that you would get more small print, not less. I think there is something in this if the noble Lord will just consider the possible variations that one could get.
We have also this, have we not? The householder himself—I think the noble Lord suggested that this should be an alternative to the ordinary form of policy, the non-standard form—will want to have this alternative to the ordinary policy to which he can make such adaptations as he thinks fit. He may say that he does not want necessarily to cover the house so that if it burnt down the whole cost can be paid to him; the premium may be far too high. He may be prepared to settle for something else and build a smaller house. There may be occasions of all sorts. I know cases of this kind myself.
Therefore, we are going to have, are we not, the standard form which, even in the house world, I think I have demon 1128 strated to the Committee, could become quite complicated. We will have side by side with that the non-standard form which is obviously adaptable to meet the individual case either of the property or particular circumstances of the assured. We shall have to have special rates in some cases because of certain features of one sort or another. Most of that is dealt with in the first proviso. Could the noble Lord, Lord Jacques—and I do not ask him to give me a great explanation to-night—at some time be so kind as to explain the second proviso? It seems to me that we may have got it the wrong way round here. As I read it, the insurance company is not to be under a duty to take on risks which go, in aggregate, beyond its financial viability; but when you consider its financial viability you are not to take account of certain other policies. This way of drafting seems to me to be almost a requirement that the insurance company shall take on business beyond what it viably can handle in terms of money. I do not think that this is meant, but that is why I say that I do not understand the second proviso, and that I should need an explanation of it.
Finally, is it really necessary or sensible to provide in subsection (2) that in the case of a default the Secretary of State withdraws the authorisation? I do not think that this fits in with what has been said at this Committee stage. So far we seem to have been rather careful about occasions when various forms of control should be imposed on an insurance company, and if anything is draconian, this seems to me to be the case in point. Having said that, I am sorry that my noble friend Lord Aldington has gone for a moment, but I should have thought that we should be able to do on a voluntary basis the sort of experiment that the noble Lord, Lord Jacques, wants. I see no reason why one should not encourage simplicity. I believe it has already started in a number of fields. I am entirely in agreement with him that the sort of rubbish that lawyers like myself write in the small print is wholly lamentable and does nothing but harm, and the clearer and simpler way is better, because usually the simpler one makes it the more effective it is, and certainly it is much more easily understandable. I am entirely at one with him in this part of the campaign, but, on reflection, would 1129 he not agree that, instead of having rather a complicated piece of machinery (even if it is enabling), with one or two rather difficult technical points to which I have just drawn passing attention, we might explore this on an experimental basis with the insurance companies with the encouragement and assistance of the Department, and see whether we can make progress that way? If the noble Lord will consider that, rather than pressing ahead with this Amendment to-night, I am sure it is something we could happily talk to him about.
§ 9.48 p.m.
§ LORD STOW HILL
My ego would swell to an inordinate size if I found myself giving tutorials to so distinguished a person as the noble Viscount who has just spoken, but of course I would do what I possibly could. I am sorry to keep disagreeing with him, but he said that the drafting was no doubt excellent and that it was his fault that he could not understand it. The position is precisely the reverse. I entirely agree with him that more of a consent basis would be preferable to the sanction proposals contained in subsection (2). This is simply a sketch and an attempt to work out a plan, and one works out a plan always, when one is in Opopsition, with the disadvantage of doing one's best without skilled assistance.
VISCOUNT COLVILLE OF CULROSS
May I just say that I remember the position only too well, and will the noble Lord please not consider that my criticisms of drafting were directed at him in any way. They were simply an attempt to show that there are difficulties in this which one has to take a certain amount of trouble to avoid.
§ LORD STOW HILL
I entirely accept that. I was speaking perhaps in a slightly lighter vein of humour. May I explain the object of the second proviso? Clearly you cannot expect an insurance company to undertake business which is in excess of its capacity, but, on the other hand, one has in mind possibly that an insurance company which is already fully stretched by the issue of policies in its normal form, at its normal rate of premium, to cover the particular risks which are in the classes concerned, might say" It is not the slightest good your giving a direction to us to issue 1130 these new standard policies under the regulations you made. We are already fully committed." Therefore one has to try to devise some method to bring it about that the insurance company must make an endeavour to comply with the regulation or directive by issuing the policies in standard form, and it should not be a complete answer on the part of an insurance company to say, "We are already fully stretched by the issue of our normal policies; we cannot comply with what you want us to do, so we are outside the scope of your proposal". That is the sole objective and the endeavour, perhaps rather clumsy, has been incorporated in the second proviso to exclude from the account the company's normal policies when you are asking the question, "Can it undertake any of the new standard policies?" That is the objective. I quite accept that probably it would not work and would need a considerable amount of amendment.
§ 9.51 p.m.
§ LORD JACQUES
I think two issues have been raised: first of all, whether this should be done in the way in which the Amendment seeks or whether it should be done voluntarily. I should like us to look for a half-way house between the two. I should like to see a very simple clause in the Bill giving the Secretary of State power to pursue this matter and in due course to make regulations so that all companies fell into line with the standard policy when there had been proper consultation, but without the complication there is in the Amendment as it is now. A simple enabling clause assuming that any hedging or provisos could if need be go into the regulations and need not be in the Bill itself. I should prefer something in the Bill, but something quite simple.
The second issue that has been raised is what is to be done with the special cases. I think this whole problem should be approached in much the same way as the multiples have approached the sale of goods to the consumer, especially the way in which they have approached the sale of fashion goods to the consumer. They do not provide all sizes; they provide only the size which is in demand and which can be mass-produced economically. I should like to see it done in that way so that there was 1131 a standard policy that would fit most cases, but not necessarily all cases. The insurer would always have a way out: "Yes, you can have the standard policy, but in your particular circumstances the premium will be more"; because your Lordships will remember that I have stated ail the time that the insurer should be completely free to fix the premium.
So there are two ways in which to be flexible. The insurer can say, "The terms of this policy do not cover your circumstances, but I can offer you another policy", or he can say, "In order to get the policy in your circumstances the premium would be £x plus". I think there is plenty of scope for flexibility. Would the Minister give consideration to the possibility of a brief and simple clause in the Bill authorising the Secretary of State to consult with the industry with a view to there being common policies in addition to the policies issued individually by the companies?
VISCOUNT COLVILLE OF CULROSS
May I say that to do that one needs no legislative authority at all. There is no problem about the Department consulting with the industry to do the sort of thing which the noble Lord has been talking about. I do not think it needs regulations either. We could get an agreement. It would need to be an experimental one in the first place. I do not think we need anything in the Bill at all, but certainly I should like to consider this point with the noble Lord and with some of the ideas which I know he can introduce from his wide experience in meeting the demands of consumers of all sorts. But I do not think we necessarily need anything in the Bill, and from what the noble Lord has just said he would need to convince me that we should actually need legislative powers at all.
§ THE EARL OF ONSLOW
There is one other very important point to raise on this matter. The British insurance industry aims always to tailor-make its policies and I think, on the whole, that it does. Again, I have to declare my interest in that I work for an insurance broker. Lloyd's tend to say that they will insure anything, although there are exceptions to that, and that meets the point of the noble Lord, Lord Jacques, about all sizes in the fashion world. The industry 1132 tries to produce all sizes. Secondly, one of the main contentions which the British insurance industry is making when it goes into the European Economic Community is that it wants to be able to offer this "all sizes" form of policy—
§ LORD JACQUES
There is a misunderstanding here. I am not suggesting that the insurance industry should offer all sizes, because it is already doing that. What I am suggesting is that, in addition to offering all sizes, there should be a standard policy which is common to all companies, and because it is standard there could be comparisons of premium as between one company and another. In that way the consumer would be able to see how far there was in fact competition.
§ THE EARL OF ONSLOW
I take the noble Lord's point. Most insurance company policies vary slightly, but there is very little difference in the premium charged for them. But if we start trying to regulate the wording of insurance company policies by law or by directive, we get into the trouble which the British insurance industry is accusing some of the Continental insurance industries of getting into in the E.E.C., and stultifying competition. Having listened to most of what the noble Lord has said I am sure that that is not what he wants to happen.
I agree with what my noble friend has said. There is intense competition and a great many of the policies are really, to all intents and purposes, exactly the same. Companies know that if they cut the rate then, sooner or later, they will go broke. The business is as fine cut as that and we have seen, as I said on Second Reading, that when you insure you pay for what you get. If you try to get cut-price insurance you will get cut-price treatment; and if the price is cut too much you will find when you make a claim that the gentleman is not there to pay you out. It is as simple as that. It is the most intensively competitive business in the world. I have been involved in it overseas, where the competition was such that the agents automatically gave away all their commission except for 1 or 2 per cent. When you have a low standard of living and so on, you can manage to live on that; but in this country it is not quite so easy. But the competition is 1133 quite intense and I really do not think there is the slightest need for this standard policy business. The policies will certainly not have any less small print than the present ones, and I cannot see that they will do any good whatsoever.
§ LORD JACQUES
If there is very little difference between the policies issued by the various companies at present, I should have thought the idea would be very easy to put into operation. As I understand it, the Minister would like to think about this matter between now and the next stage of the Bill, and we, too, should like to think about it. In the meantime, and on the understanding that we have not dropped the matter but are going to think about it, I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Clauses 42 and 43 agreed to.
§ Clause 44 [Minor and consequential amendments and repeals]:
§ 10.0 p.m.
§ THE EARL OF LIMERICK moved Amendment No. 48:
Page 33, line 6 at end insert—
("() Any regulations made by the Industrial Assurance Commissioner by virtue of paragraph 6(2) of Schedule 2 to the Act of 1958 which are in force immediately before the passing of this Act shall, so far as they could have been made under subsection (1) of section 37 above, have effect as if made under that subsection.")
§ The noble Earl said: The effect of this Amendment is simply to preserve in force regulations made by the Commissioner under the powers conferred upon him by the Insurance Companies Act 1958 in so far as they would be within the powers conferred upon him by Clause 37(1) of the Bill. I beg to move.
§ Clause 44, as amended, agreed to.
§ Clause 45 [Interpretation]:
Page 33, line 37, leave out ("(2)") and insert (1)").—(The Earl of Limerick.)
§ Clause 45, as amended, agreed to.
§ Remaining clauses agreed to.
§ Schedule 1 [Minor and Consequential Amendments]:
Page 36, line 35, leave out ("20") and insert ("19").—(The Earl of Limerick.)
§ Schedule 1, as amended, agreed to.
§ Schedule 2 [Repeals]:
§ THE EARL OF LIMERICK
With Amendment No. 51 I can conveniently take Amendments Nos. 53 and 54. These three repeals are all consequential upon the Amendment to Clause 37. I beg to move the three Amendments, Nos. 51, 53 and 54.
Page 37, line 13, at end insert—
|("13 & 14 Geo. 5. c.8.||The Industrial Assurance Act 1923.||Section 18(1)(a)."|
§ Page 37, line 45, column 3, at end insert ("Section 36(1).").
§ THE EARL OF LIMERICK moved Amendment No. 52:
Page 37, column 3, leave out lines 29 to 31 and insert—
("Sections 25 and 26. Section 28.")
§ The noble Earl said: The effect of this Amendment, No. 52, is to repeal Section 26(1) of the 1958 Act, which is now spent, and Sections 26(3) and 28 of that Act, which are consequently also spent. I beg to move.
§ Schedule 2, as amended, agreed to.
§ Schedule 3, [Application to Northern Ireland]:1135
Page 39, line 21, leave out ("(13)") and insert ("(3)").—(The Earl of Limerick.)
Page 39, line 27, leave out ("(a)") and insert ("(b)").—(The Earl of Limerick.)
§ THE EARL OF LIMERICK
This Amendment is consequential upon the Amendment to Clause 34—that is, Amendment No. 36. I beg to move.
Page 42, line 2, leave out from ("for") to ("in") in line 3 and insert (""8" there shall be substituted "19"; and").—(The Earl of Limerick.)
§ Schedule 3, as amended, agreed to.
§ Remaining Schedules agreed to.
§ In the Title:
THE EARL OF LIMERICK moved Amendment No. 58:
line 3, leave out ("life").
§ The noble Earl said: This Amendment rectifies an error in the Long Title of the 1136 Bill in its description of the effect of Clause 41. That clause amends Section 2 of the Life Assurance Act 1774 by validating certain group policies, both life and non-life, and the reference to "life" in the Long Title needs to be deleted. I beg to move.
§ House resumed: Bill reported, with Amendments.