§ 2.39 p.m.
§ Lord McIntosh of Haringey rose to move, That the draft order laid before the House on 19th October be approved [28th Report from the Joint Committee].
§ The noble Lord said: My Lords, the purpose of this order is to amend the schedule to the Insurance Brokers (Registration) Act 1977. That schedule prescribes the number of members of the Insurance Brokers Registration Council and how they are to be chosen. When the Act was passed, it was anticipated that the original provisions might he changed, and there are powers to amend those provisions.
§ Why is it necessary to amend the schedule? The House will be aware that the Government are currently making progress through Standing Committee in the other place with the Financial Services and Markets Bill. The thrust of that Bill is to create a single statutory regulator for the financial services sector. Last year, before the Bill was introduced and having consulted interested parties, the Government decided that, as regards the distribution of general insurance as opposed to long-term life insurance, statutory regulation might not be appropriate. It is a matter of balancing the costs and rigidities of statutory regulation against the requirements of consumers for adequate protection. The Government's view, and that of many who replied to the consultation, is that the case for statutory regulation was not proved.
§ However, there is genuine concern about the need for high standards of business conduct and propriety among those businesses which distribute general insurance. The former Economic Secretary to the Treasury, Helen Liddell, announced in July 1998 that the Treasury would look to the insurance industry and general insurance intermediaries to work together and devise an effective non-statutory means of promoting high standards of conduct. Progress in forming a general insurance standards council has been very encouraging so far. It is hoped that all those businesses which have gained Financially from the distribution of general insurance will respond positively to the challenge of self-discipline.536
§ We intend to repeal the existing statutory regulation in the field of general insurance distribution; that is, we propose to take powers in the Financial Services and Markets Bill to repeal the Insurance Brokers (Registration) Act 1977, which sets up a council, charges it with carrying out certain functions and provides that those persons who wish to trade as insurance brokers (whether sole traders, partnerships or bodies corporate) must register or be enrolled by the council. Registered brokers must abide by rules set out by the council, which include a code of conduct, provisions regarding professional indemnity insurance and requirements as to financial adequacy, accounts and statements.
§ It is an offence to trade as an insurance broker without being registered. The costs incurred by the council are met from fees and there is no public funding. However, until the Act is repealed, the council remains answerable for the discharge of its statutory functions. Given the expectation of its being wound up, it is reasonable that the approach of the council should now be one of active care and maintenance. The changes proposed are intended to help the council conduct affairs in that fashion.
§ As I said, the schedule to the Act prescribes the size of the council, the number of its members and how they are to be chosen. The proposals in the order, which the House is now considering, will reduce the size of the council from 17 members to 10—six members of the current council who have been elected and four nominated by the Treasury—who will then serve until the council is wound up. However, as a contingency measure, the proposals also allow the Treasury, at the request of the council, to fill a casual vacancy should the council decide, in the light of its current situation, that to hold an election to fill such a vacancy would be wasteful of resources.
§ The Treasury will then make a further order, which will be subject to annulment—in other words. to the negative procedure—to replace the existing requirements as to elected members of the council with simpler requirements. It seems unlikely that the new election scheme will be activated, but the Treasury wishes to provide for that to happen just in case winding-up takes longer than expected. The original intention was that a majority of members of the council should be elected from the broker community. These proposals are designed to ensure that that intention is respected.
§ Finally, I should like to assure the House that, in accordance with the existing schedule—much of which will remain in place—the council has been consulted on this draft and on the other order to which I referred. I am pleased to tell the House that council and Treasury officials have worked closely together in developing these proposals. I beg to move.
§ Moved, That the draft order laid before the House on 19th October be approved [28th Report from the Joint Committee].—(Lord McIntosh of Haringey.)
§ Lord Newby
My Lords, we on these Benches support the Motion. However, I have just one question 537 for the Minister. It relates to Article 2(1)(b) of the order. It states that the Treasury is appointing four persons to the council, one of whom,shall be a barrister, advocate or solicitor".There is then a wonderful piece of "Sir Humphrey" language, which says that one of the persons might or might not be an accountant and one of the others might or might not represent the interests of policyholders of insurance companies. Therefore, as there is certainty that one of these nominated people "shall" be a lawyer, should there not be equal certainty as regards having on the council an accountant and someone who can represent policyholders?
§ Baroness Seccombe
My Lords, I thank the Minister for outlining the purpose of this statutory instrument. We on these Benches have no particular problems with the order. As a generality there is consensus that the statutory status of the IBRC—albeit that it will effectively operate in limbo—should be ended, but that before its abolition the council should continue to be subject to efficient administration. However, I have a question for the noble Lord. Is not the problem of statutorily required appointments to the IBRC a problem of the Government's own making?
Having sought—albeit subject to the decision of another place and the usual channels—to subject the Financial Services and Markets Bill to the procedure of carry over, such anomalies as that thrown up by this order were bound to occur. That being so, will the Government in any future use of the carry over procedure do their utmost to ensure that these kinds of problems either do not arise or are ironed out before the event?
§ Lord McIntosh of Haringey
My Lords, the noble Lord, Lord Newby, is not a lawyer and therefore I can make the following comment without fear of causing offence. We understand that it is always possible to find lawyers to serve on these bodies but it is not always possible to find accountants. That is the reason why the provision for accountants and for policy holder representatives is slightly more flexible. I doubt whether it will make any difference in practice.
Without accepting the noble Baroness's strictures about past policies, I give her the assurance she wants about consultation.
§ On Question, Motion agreed to.