Baroness Neville-Rolfe
Main Page: Baroness Neville-Rolfe (Conservative - Life peer)Consumer Rights Bill
Baroness Neville-Rolfe Excerpts
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)
My Lords, I have a lot of sympathy with the intention behind Amendment 50B. It seeks to help consumers get a better deal from their insurers through the provision of more information, which would help them to make an informed choice. I am glad that we are discussing the issue today. But I am equally concerned that the amendment could lead to customer confusion and might even hamper competition in the insurance market, which ultimately is not in the interest of consumers. I shall first address the requirement under the amendment to disclose risks taken into account when setting insurance premiums. An example of that would be the age of a driver, as has been mentioned.
The idea of equipping the consumer to make informed choices is in my view an admirable one, but mandating the provision of complex information would be likely to result in the opposite outcome. A complex algorithm would not help the consumer and competition could be affected. In my experience, there is good practice out there. As it happens, only yesterday I was renewing my motor insurance on my mobile phone, which kept giving up on me, so I had to ring in again. However, in the end I did succeed. It was actually quite interesting because I had a discussion about some of the options. I asked, “If I take one of my sons off the insurance, will it be cheaper?” and so on. They were very clear and also went through extra things that one might want to purchase but had no obligation to do so. Those were the sorts of thing that the noble Baroness mentioned, such as legal expenses or a replacement car.
As we know, it is important that consumers—who are busy and not always financially literate—take in the key information needed to decide whether to buy an insurance product. To overload them with more information can put them off reading any of it at all. There appears to be little appetite from consumers to understand the complexities of how premiums are arrived at. We know that consumers concentrate on price. A key part of price competition comes from the respective capabilities of insurers to assess risk. Asking insurers to disclose these assessments could harm competition as it would be tantamount to giving away the secrets of an insurer’s business model. I think that that was the argument discussed in the other place. Further, the price of premiums could increase as a result of this amendment as it imposes an additional cost burden on insurers to provide a breakdown of detailed premiums—which inevitably will be passed on to consumers. This cost burden could damage an industry that employs 320,000 people in the United Kingdom.
The amendment also has a requirement to disclose profit relating to a policy where no claim has been made. Information about expected profit if there is no claim on a policy can be only speculative. Insurance works by pooling risks together—that is the whole principle of it. If no claim has been made on a policy, this does not necessarily mean that an insurer makes a profit on that policy. I also highlight that the Financial Conduct Authority’s conduct of business rules already cover the provision of pre-contractual information by insurers—that is, what you are told before signing up—so creating a separate set of rules in this area is unnecessary.
The Financial Conduct Authority’s General Insurance Add-ons Market Study highlighted that there is currently no consistent or common method for measuring the value of these products, and proposed that insurers should publish claims ratios to increase transparency and focus on value. This would be an aggregate: how much they pay out relative to income for the whole fund. The FCA has not yet concluded that work so it is important that we allow the regulator space to draw its conclusions before taking additional action. Of course, it has powers to add or amend its rules—in this case, the Insurance: Conduct of Business Sourcebook.
Turning to Amendment 50D, I am again concerned about the risk of adverse consequences for consumers and about the potential conflicts with existing rules on claims handling set by the FCA. I will explain my concerns by going back to the fundamental nature of some insurance claims. For example, as the noble Baroness mentioned, property insurance claims for riot or flood damage can take a long time to resolve simply because of the scale and nature of the damage. A flooded property can take many months to dry out and it is vital that the property is dry before any renovation takes place. In these cases, to assist the claimant through a period and alleviate hardship, interim payments and temporary accommodation are usually paid immediately.
Instead of helping consumers, the amendment could have perverse effects. It could encourage insurers to rush people back into their homes and close the claim just to be within the law rather than because it is the best outcome for the customer. I am sure that that is not the noble Baroness’s intention but that is a risk, as was suggested in the other place—and one that I am very keen to avoid in this important piece of legislation. Further, I am particularly mindful that artificial deadlines would put a strain on customers to quickly evidence the loss to validate their claims, and might even encourage what could be seen afterwards as fraud.
I know from experience that processing and verification can take some time. I also know that insurers, in general, take their obligations very seriously. Insurance is an important industry and pays out £452 million every day. Good insurers earn loyalty and a good reputation which allows their business to flourish and grow.
I think it is also relevant to set out how the Government have responded to recent flooding in the UK. To ensure that home insurance is affordable for 350,000 properties at highest flood risk the Government have worked with the industry to create Flood Re. We debated this during the passage of the Water Bill. When up and running in 2015, Flood Re will effectively limit the amount that most UK households at the highest flood risk will pay for flood insurance. We have also announced record levels of government investment in managing flood risk.
Still on the subject of delays, the insurance industry complies with all-encompassing consumer protection and redress rules set down by the FCA which in many cases exceed the measures proposed in the Bill. The FCA’s Conduct of Business Sourcebook, which I have already mentioned, requires that insurers settle claims promptly once settlement terms are agreed. The FCA has recently undertaken work on household claims in particular. This year, it conducted a review which concluded that there was no evidence of insurers deliberately delaying settlement. Where things go wrong, as they unfortunately occasionally do, consumers have the right to complain to their insurer and can also go to the Financial Ombudsman Service. A ruling made by the service is binding on the financial service provider.
We have discussed a very serious matter. I feel we have the balance right in this Bill, for all the reasons I have outlined, and I ask the noble Baroness to withdraw the amendment.
Baroness Hayter of Kentish Town
The Minister clearly needs some advice about topping up her phone battery if she is going to be renewing her insurance that way. We trust she got it through all right.
I am delighted that the insurance industry is paying out £452 million a day. We do not know how much it is getting in per day, which from the point of view of the consumer is the interesting figure. I was trying to multiply 452 by 365, but I did not manage to do it. However, that is the issue. If you get a no claim bonus for not having made a claim in the previous year, which I hope the Minister got, the real issue is that you have no idea of its value. In other words, you do not know how much the insurer has saved by the fact that you have not claimed.
I think I made it clear, after what was said in the Commons, that we are not saying that this will be an artificial deadline. The amendment states only that the fact that someone has had to move out of their primary accommodation can be taken into account when determining the timeframe. We were not saying that it was the determinant.
On Amendment 50B, the issue is that we want consumers to shop around. We want them to have the details to be able to judge price, and without some of the underlying assumptions it is hard to do that. I hope we can find a way of strengthening the consumer in this way, whether through the FCA or this Bill, but the FCA’s responsibilities are wider than just consumers whereas this Bill has consumers at its heart.
Baroness Neville-Rolfe
We have consumers at our heart in relation to this Bill and many other pieces of legislation, but there has to be a balance. I am sure we agree that if you put up costs inappropriately, the consumer is the loser because costs tend to be passed on in higher prices. We have to work together to find the right balance.
Baroness Hayter of Kentish Town
I certainly agree with that, but I am not always convinced that having better-informed consumers leads to higher prices. That may be for another discussion. I beg leave to withdraw the amendment.
Baroness Neville-Rolfe
My Lords, I make it clear that sites that try to palm themselves off as legitimate government services need to be stopped. We do not want cowboys battening on the services that are legitimately provided by the state. Therefore I sympathise with these amendments. This is a problem that the Government recognise and are taking action on. I was to glad to hear from the noble Lord, Lord Harris, about some of the successes that trading standards has had. He is right to emphasise the scale of the issue and the numbers involved in copycat websites.
We know that the way most people inadvertently end up on misleading websites of this kind is by clicking on adverts that are prominently displayed on search results pages. The Government Digital Service, which the noble Baroness mentioned in relation to the Cabinet Office letter, has been working with search engine providers such as Google to take down adverts for these sites. They are in breach of the search engines’ own policies and many of them have been removed.
There are a lot of parallels here with the problem of websites offering copyright-infringing material which also tend to be found through search results. We have been working on that, too. I have had meetings with some of the ISPs and others, and I am pleased to say that the main search providers are fully engaged on the issues.
We have also made sure that the existing law is being effectively enforced. Earlier in the year, my colleague Jenny Willott MP provided £120,000 in additional government funding to the National Trading Standards eCrime Team to support enforcement action against copycat websites. In late June, four search warrants were executed on properties in England. The operation led to the arrest of five individuals and disrupted the operation of at least 25 copycat websites. A criminal investigation is ongoing. This sort of action matters because it sends a message to the cowboys that this will not be tolerated.
Government agencies are also proactive in this area. The Intellectual Property Office is pursuing, prosecuting and putting out of business two operators of websites masquerading as official IPO services. That action was pursued successfully using the common-law remedy for passing off.
The noble Baroness, Lady King, mentioned the ASA. It continues to take action on a case-by-case basis and can take action on repeat offenders. It took action in November 2013 on Jars Services Limited which was trading—wait for it—as www.drivinglicence.org.uk. In September 2013, it took action against TAD Services trading as UK-Passport.net, and in June 2013, it took action against European Health Insurance Card trading as EHIC. The noble Baroness made a good point about the areas where this fraud is being perpetrated. We need to work to get those sites taken down.
The IPO case has been helped because for the first time ever, we have set up a website where consumers and traders can report copycat sites. This is specifically to protect and empower other consumers. Full details can be found on the excellent GOV.UK website which we are all pleased to see up and running. It allows a modern and dynamic response appropriate to the online era.
I reassure noble Lords that there is already law in place to protect consumers from being misled into a purchase. The Consumer Protection from Unfair Trading Regulations 2008 have been much mentioned during our debates and are very important. We also take enforcement action against these websites under intellectual property law. With a robust legal framework in place, we have been working to enforce the law and go further in partnership with industry.
However, I am not convinced that the law needs to be changed in the way proposed today. The amendment would in effect require government to regulate every third-party service. Government would need to approve it, issue guidance and determine reasonable cost scales. That would be a significant intervention in this marketplace. We should not take such steps unless the interventions we already make are not working and there is clear evidence that further intervention is needed.
People’s behaviour and expectations with regard to online services are constantly evolving and difficult to predict. We are keen not to stifle innovation or negatively impact websites that are honest and legitimate and provide value-added services. The most effective option is to enforce the existing legal sanctions against misleading websites which breach consumer protection legislation or IP law. In addition, we are going further by supporting search engines in assessing whether a third party offering services related to a government service is actually a genuine service. This complies with the search engines’ own guidelines and polices.
Lord Harris of Haringey
Could the Minister elaborate on that point? If the Government are working with search engine providers and essentially saying to them, “This is a legitimate additional service provider”, or, “That is not”, are they not already starting the process of regulating what she talked about as a legitimate marketplace? They must make that judgment already to be able to say to the search engine providers, “This is an illegitimate, copycat website”, or, “That is a legitimate service provider”.
Baroness Neville-Rolfe
My Lords, I thank the noble Lord for raising that point. I know what is happening in certain areas but not across the board. If I may, I will take the noble Lord’s question away and come back to him. It is also important to publicise better the sort of things that are being done in this area. I have tried to do that in a small way today, as has the noble Baroness, Lady King. For the present, I ask her to withdraw her amendment.
Baroness King of Bow
My Lords, from what the Minister said and in conjunction with the points raised by my noble friend Lord Harris, I think the Government are saying, essentially, that it would be too much work for government departments to approve websites offering additional services. The point I wanted to make—as my noble friend did—is that that does not really make sense, for a couple of reasons. First, the extra work is minimal. Indeed, as my noble friend pointed out, it appears that it is already being done to some extent at the moment. Secondly, that extra work—whatever it may be—is insignificant when compared to the detriment being done to the consumer. That is the point we must consider here.
We also have to take into account all the time currently spent by government departments or other offices answering consumer complaints in this area. For example, the DVLA has received 170 complaints about scam websites since 1 March. The Home Office, in nine months in 2013, received 590 written customer complaints about scam passport sites. As for TfL, it had an extraordinary 1,000 complaints a day. Does not that shed some light on one of the reasons why TfL has been so proactive in this area? Would it not be helpful if Government encouraged other providers to be just as helpful to the consumer?
The other problem with the Government’s approach of leaving it really up to Google to monitor websites is that although Google has agreed to take down some of the adverts and monitor future ones, this requires much more continuous monitoring work than cutting off copycat websites at source. Critically, this approach also inevitably leaves some consumers unprotected for some stretches of time, and therefore undermines consumer rights. As my noble friend Lord Harris made clear, these websites are big business. They make their living by inflicting detriment on the consumer in an entirely parasitic manner. If we are all to play our part, it must include legitimate providers taking the time to say whether a site provides an additional service. That is the purpose of these amendments.
At the start of her speech the noble Baroness said that these sites need to be stopped. I welcome that forthright attitude, but I am sure she will understand my disappointment that it simply is not being followed up with what would be very simple measures.
Baroness Neville-Rolfe
Perhaps I could make one point about the idea of new legislation, which I think is what the noble Baroness is calling for. We are very concerned not to stop legitimate organisations that do provide added-value services related to those provided by government from advertising via search engines. That is an important objective; there are always two sides to these questions. At the same time, as I said earlier so robustly, we want to stop those who make false or misleading claims, who do not provide any added value to users, and who thus understandably frustrate and upset those who, as in the example given by the noble Baroness, choose the wrong sort of website.
The difficulty is that people’s behaviour and expectations with regard to these services are constantly evolving and difficult to predict. That is why we are pursuing the option of supporting search engines in assessing whether a third party that is offering services related to a government website is actually a genuine one which complies with the search engine’s own policies. I think that it would be difficult for us to do this on our own. We have set up the website page www.gov.uk/misleading websites, which I mentioned earlier, and we will monitor the effectiveness of this approach over the coming months. We need to work in this evolving and important area, and I can assure the noble Baroness that we are determined to make a difference.
Baroness King of Bow
The problem I have with the Minister’s response is twofold. First, the legitimate business issues she is talking about would not suffer any problems as a result of the amendments we have put down because they would be providing additional services. Secondly, when the Minister tells us, as she just has in her intervention, that Google is looking at which copycat websites are appropriate and which are not—obviously if they are appropriate, they are not copycat websites, but I am sure the Minister gets my meaning—if we take the example of TfL and the congestion charge, surely TfL is better placed to determine whether a website is providing an additional service or not. Why should the people at Google, clever as they may be, essentially have to do the job that a provider is far better placed to do? I genuinely do not understand the Government’s persistent objections on these points and I would be very grateful if the Minister could pay serious attention to reviewing them. However, until that point, I will withdraw the amendment.
Baroness Neville-Rolfe
Before we finish on this important matter, which I think we both care about a lot, perhaps I may say a few more words. Before we decry the work being done with Google—I think the noble Baroness is asking whether it is sufficient—in the period between November 2013 and June 2014, click-through rates to the official sites improved as a result of work with Google. From November 2013 it was 43% on passports and by June 2014 it was 72%. Obviously there is still a problem, but we are seeing an improvement. Driving licences: 41% in November 2013 and 69% in June 2014, and of course we are now in October. I believe that this is an area where we have to work with the industry. However, I will respond to the point made by the noble Lord, Lord Harris, about how we can link in and identify the third parties in every relevant area. As I say, I will come back to him and to the Committee on that issue.
Baroness Oppenheim-Barnes
My Lords, I would like to make a point in the limited time remaining, which is that the companies that continue to give paper bills and continue to give the sort of services we have asked for are not losing anything, because of all the extra money they have earned from the vast majority of people who are paying online. So there is no financial loss to any of these companies, and particularly to BT.
Baroness Neville-Rolfe
My Lords, first, I thank my noble friend Lady Oppenheim-Barnes for her amendment, for her previous two amendments and for providing us with a useful and constructive discussion. She was not here for what I was going to describe as a gallop, but my noble friend Lord Hodgson rightly described as a canter, around this issue in our previous session. I shall not, in the interests of time, repeat everything I said on that occasion. For example, we had a good discussion about the point that the noble Lord, Lord Harris, made about ID. While I have the floor, I also pay tribute to everything that my noble friend Lady Oppenheim-Barnes has done for the consumer over many years. Things have improved as a result of things done recently, from domestic and EU sources. This Bill, if we can get it through, will make further improvements.
I was also glad to hear of my noble friend Lady Maddock’s experience, which I shall come back to in a minute. I am well aware of the Keep Me Posted campaign, which the noble Lord, Lord Harris, mentioned, and have indeed talked to some of the campaigners about their plans. It is good for the postal angle to have been articulated by the noble Lord, Lord Clarke of Hampstead, whom I thank. I also understand that this amendment is talking about the regulated areas, not everything in general; that point is well made.
We are returning to an issue that has been debated in the House on a number of occasions. It is very much a House of Lords issue and I therefore thank everyone for their thoughtful contributions. The amendment is addressed to utility suppliers but my noble friend Lord Hodgson mentioned banking, which is not in the amendment but, no doubt, similar considerations apply. All these sectors have regulators to ensure that consumers are treated fairly, in accordance with licensing rules and wider consumer protection law, including those intended to protect the more vulnerable in our society—a point that I am going to come back to.
Customers may take queries or complaints to the relevant regulator and receive some form of assurance on their position—for example, should a business seem to be charging excessively for supplying a paper statement or for processing a cheque payment. I believe that we have already established a consensus that some individuals value retaining the option of paper transactions. We are all clear that the terms of the contract must be set out at the outset, at the time of agreeing the contract, and that they must be clear and transparent. In particular, consumers need to be clear and agree if there is to be a change in the way in which they receive and pay their bills. In this way, the customer knows how bills and statements are to be provided and on what terms. As I mentioned in our previous debate, paper bills and cheque payments have never been free. The fee for processing them was always borne by the consumer but was tied up in the administrative costs of the utility, and the charge was spread across the customer base. Thankfully, today these charges are more transparent and linked to costs.
This amendment would be of particular disadvantage to online customers, for whom statements are readily available and can be printed if necessary, especially by the young but increasingly by our digitally aware “silver surfers”, because many people are embracing the internet at every age in a very surprising way. I welcome the opportunity to save money that paperless bills offer, and so do many people. Paying by direct debit, which was condemned by my noble friend Lord Blencathra, can also enable people—some of them vulnerable and elderly—to budget more effectively than being faced with quarterly or lump-sum bills. There can be some value there. For them, the proposed statutory requirement set out in these amendments adds little but the possibility of extra costs.
It is undoubtedly more expensive for a regulated business to print out and post bills to its customers than it is to deliver them electronically online. It is not for the Government to dictate that certain costs cannot be accounted for with the consequent burden instead being potentially passed on to all customers. It is surely reasonable to incentivise customers to use the cheapest processing mechanism by sharing savings with them. This amendment would outlaw that and almost certainly drive up the charges to online customers.
Baroness Maddock
When my mother died, the utilities were all very good. They have special sections to deal with this. I had thought that things would be terrible as I do not usually find them terribly helpful but actually most of them deal with these situations quite well. However, for me, having the paper copies was important as I could see what was going on. However, I cannot fault the utilities as they were very good.
Baroness Neville-Rolfe
It is always good to have that sort of good experience on the public record. I thank the noble Baroness for that intervention.
The noble Lord, Lord Clarke of Hampstead, asked whether there were any talks going on with the regulator to ensure that payments to Royal Mail are fairer. I will need to write a letter to the noble Lord on what is largely a Royal Mail competition issue, if I may. I was also pleased that the noble Lord, Lord Blencathra, shared his experiences, knowing that he comes from the north of England, even though I do not think that I agreed with him on every aspect. The noble Lords, Lord Hodgson and Lord Blencathra, talked about meters. The Government are working with industry on smart meters which will enable readings without a visit to a house and therefore make the cost of energy use more visible. That will be better for consumers.
In conclusion, this is a difficult area, as we do not want society to incur the costs of printing and sending off bills to everyone if that is not needed. The trouble is that if there is no cost to paper bills, people will just opt for paper anyway even if, like me, they can manage online. I think that that is a risk. I know that is not a popular thing to say but I hope that noble Lords will reflect on that aspect of things. There is already a range of billing, payment and statement options available on the market. We agree that it is important that the appropriate protections on access to paper bills are kept in place, and are doing that through our licensing regimes and specific regulatory and sector interventions and by driving quality, choice, fair prices and value for money for consumers through good competition and good consumer law.
We will of course reflect on what has been said in this lengthy and important debate, and see if anything can be done. However, in the light of what I have said, I ask my noble friend to withdraw her amendment.
Baroness Oppenheim-Barnes
I thank my noble friend for that very careful and detailed response, which was extremely interesting. She paid a lot of attention to what has been said. I am afraid that she will not change my mind but on this occasion I beg leave to withdraw the amendment.
“(2) References in this Part to treating a contract as at an end are to be read in accordance with section 19(13).”