§ Mr. LidingtonTo ask the President of the Board of Trade if he will make a statement on the Government's response to the European Commission's recommendation on insurance intermediaries.
§ Mr. Neil HamiltonThe Commission issued its recommendation in December 1991 as part of the single market programme. My Department issued a consultative document on it in November 1992. Most comments focused on the protection afforded to UK consumers by the current UK regulatory arrangements. Little evidence emerged to suggest that there are significant barriers to trade affecting insurance intermediaries which need to be addressed through Community legislation.
183WAs regards the sale of most life insurance policies, the regulatory regime established under the Financial Services Act 1986 already meets the detailed provisions of the Commission's recommendations. As regards the activities of registered brokers, the rules of the Insurance Brokers Registration Council are also in accord with the recommendations. However, a number of respondents criticised the non-statutory arrangements under the Association of British Insurers' general business code of practice, "the ABI Code", which covers the sale of general insurance by company representatives, tied agents and independent intermediaries who are not registered brokers.
The ABI Code was last revised in 1989 and its operation has since been monitored by an independent code monitoring committee chaired by Sir Kenneth Clucas. In January 1993, the committee recommended several changes to the code. The committee concluded, however, that overall the code provided reasonable protection to consumers and should continue rather than being replaced by statutory regulation. The ABI has expressed its willingness to act on the committee's recommendations. In those circumstances, I see no need to introduce more statutory regulation in this area. The most appropriate and cost-effective response to the Commission's recommendation is to build on the arrangements we already have.
The ABI is today announcing a number of improvements in the operation of the code. These will clarify the code's provisions and will lead to more detailed procedural guidance for practitioners. The association has also agreed that changes in the IBRC's code of conduct and accounts rules will be reflected in the code. Further changes may be made to reflect aspects of the Commission's recommendation. There will be a publicity campaign to heighten awareness of the code and its application will continue to be monitored by the code monitoring committee, now under the chairmanship of Sir Terry Heiser. My Department will encourage nonmembers of the ABI to abide by the code's principles.
The completion of the single market in insurance will undoubtedly increase competition in the sale of insurance products throughout the Community. I shall maintain a close interest in developments, and shall be sensitive to any emerging evidence of significant barriers to trade in this area.