Insurance Bill [Lords]

Debate between Christopher Chope and Cathy Jamieson

Tuesday 3rd February 2015 Commons Chamber

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

As the Minister has outlined, this is a non-controversial Bill overall, and we did indeed debate and discuss it last week. I have no issue with clause 1 and think that it is important to get on to the other areas of the Bill on which the Minister might wish to answer some questions.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Application and interpretation

Question proposed, That the clause stand part of the Bill.

[The Temporary Chair (Mr Christopher Chope)]

With this it will be convenient to discuss the following:

Clauses 3 to 8 stand part.

That schedule 1 be the First schedule to the Bill.

--- Later in debate ---

[Andrea Leadsom]

Part 3 deals with insurance warranties and similar terms. An insurance warranty is typically a promise by the policyholder to do something that mitigates the risk. Under the current law, any breach of warranty completely discharges the insurer from liability from the point of breach. That is so even if the breach is remedied before any loss is suffered and if the breached term had nothing to do with the loss. The insurer’s remedy therefore often seems unsuitable and too punitive. The Bill provides that an insurer will be liable for insured losses arising after a breach of warranty has been remedied. It also prevents an insurer from refusing payment on the basis of a breached term that could have had no bearing on the risk of the loss that actually occurred, such as where a warranty concerning a fire alarm is breached and the insured then suffers a flood in the insured property. The Bill also abolishes “basis of the contract” clauses. These clauses convert every statement made by a policyholder on a proposal form into a warranty.

[Cathy Jamieson]

Again, it has been helpful to hear the Minister’s comments. We have no difficulty with these clauses.

On clause 9, under the current law, an insurer may add a declaration to a non- consumer insurance proposal form or policy, stating that the insured warrants the accuracy of all the answers given or that such answers form the “basis of the contract”. That has the legal effect of converting representations into warranties. The insurer is discharged from liability for claims if the insured made any misrepresentation, even if it was immaterial and did not induce the insurer to enter into the contract. The Law Commission gave the example of a claim for flooding being refused, as the Minister suggested, because the insured had failed to install the right model of burglar alarm. The clause seeks to put an end to this practice by abolishing “basis of the contract” clauses in non-consumer insurance. Clause 10 replaces the existing remedy for breach of a warranty in an insurance contract.

Clause 11 was initially not included in the Bill. That gave rise to the introduction in the other place of a new clause that replicated a similar clause originally included by the Law Commission pertaining to situations in which an insured had breached a term of contract but could show that

“its breach of the term could not have increased the risk of the loss which actually occurred in the circumstances in which it occurred.”

In the Lords Committee, some expressed the view that this omission was an error. The Minister, Lord Newby, explained that the clause as originally drafted was

“too controversial to go through the special procedure for uncontroversial Law Commission Bills.”

He did, however, admit that it was

“difficult to argue against the policy and to say that insurers should be entitled to refuse liability for a loss that is of a completely different nature from that contemplated by the breached term.”

At the Government’s prompting, the Law Commission submitted a new draft, which became the current clause 11 and which was

“intended to minimise the uncertainty inherent in the first formulation”.

The clause acts to rectify the situation prior to the Bill when the actual nature of a breach of term was irrelevant. This has been a helpful process to ensure that that piece of tidying up was done. On that basis, we have no problem with these clauses.

Question put and agreed to.

Clause 9 accordingly ordered to stand part of the Bill.

Clauses 10 and 11 ordered to stand part of the Bill.

Clause 12

Remedies for fraudulent claims

Question proposed, That the clause stand part of the Bill.

[The Temporary Chair (Mr Christopher Chope)]

With this it will be convenient to discuss clause 13 stand part.

[Andrea Leadsom]

Fraud is a serious and expensive problem for insurers and innocent policyholders alike. According to industry statistics, policyholders currently pay an additional £50 on every insurance policy because of the cost of fraud to insurers. The Bill therefore strengthens and clarifies the civil law aspect of the Government’s drive to combat fraudulent claims by policyholders. The Bill sets out clear statutory remedies for the insurer where the policyholder has made a fraudulent claim. It affirms the common law position that the policyholder forfeits the fraudulent claim. The insurer has no liability to pay any element of it and can reclaim anything it paid before it knew about the fraud.

The Bill also clarifies an area of uncertainty, in that the insurer may choose to refuse any claim arising after the fraudulent act. However, previous valid claims should be paid in full. Finally, the Bill gives the insurer the equivalent remedies against a fraudulent member of a group insurance policy.

[Cathy Jamieson]

The Minister has again clearly outlined what the clauses do. As she said, clause 12 sets out the insurer’s remedies where the insured makes a fraudulent claim. It puts the common law rule of forfeiture on a statutory footing. Where the insured commits a fraud against the insurer, the insurer is not liable to pay the insurance claim to which the fraud relates. Where the insurer has already paid out insurance moneys on the claim and later discovers the fraud, the insurer may recover those moneys from the insured. As we have heard, that provides the insurer with a further remedy giving it an option to treat the contract as if it had been terminated at the time of the “fraudulent act”. That does not apply where a third party commits a fraud against the insurer or the insured, such as where a fraudulent claim is made against an insured party who seeks recovery from its insurer under a liability policy.

Clause 13 gives the insurer the remedies where there is fraud by one member of a group scheme. Again, we have no difficulty with these clauses standing part of the Bill.

Question put and agreed to.

Clause 12 accordingly ordered to stand part of the Bill.

Clause 13 ordered to stand part of the Bill.

Clause 14

Good Faith

Question proposed, That the clause stand part of the Bill.

[The Temporary Chair (Mr Christopher Chope)]

With this it will convenient to discuss clauses 15 to 18 stand part.

[Andrea Leadsom]

Part 5 deals with two separate matters: the principle of good faith and the ability of parties to contract out of the provisions of the Bill.

Clause 14 retains the statutory and common law principle that a contract of insurance is one predicated on good faith. However, the clause abolishes avoidance of the contract as the remedy for breach, recognising that avoidance is capable of operating very harshly against policyholders.

The provisions are a default regime for business insurance contracts. They are expected to be appropriate for the majority of insurance contracts, but there may be circumstances when parties prefer to set out their own bespoke arrangements. However, if an insurer wishes to rely on a term that will operate more harshly against the policyholder than the Bill otherwise provides, clauses 16 and 17 require it to act transparently when the contract is made, by ensuring that the meaning of the alternative provision is clear, and by drawing the attention of the policyholder to it. In so far as the Bill applies to consumers rather than businesses, it is a mandatory regime. Insurers are not entitled to contract out of its provisions to the detriment of consumers.

[Cathy Jamieson]

Under the Marine Insurance Act 1906, insurance contracts are ones of “utmost good faith”. Clause 14 removes avoidance of the contract as a remedy for breach of that duty of good faith, both from the 1906 Act and at common law. The intention of clause 14 is that good faith will remain an interpretative principle, with section 17 of the 1906 Act and the common law continuing to provide that insurance contracts are contracts of good faith.

Clauses 15 and 16 prohibit insurers from inserting in an insurance contract terms that would leave the insured—be they a consumer or a non-consumer—in a worse position than that required by the Bill.

Clause 16 defines transparency in respect of what an insurer must do to draw the insured’s attention to the disadvantageous terms of the contract. Clause 17 sets out the transparency requirements. For example, the insurer should take sufficient steps to draw disadvantageous terms to the insured’s attention within a reasonable time frame prior to their entering into the contract, but when an insured has knowledge of the term, they may not claim that the insurer has not brought it to their attention. Clause 18 deals with the insurer’s remedies where a member of a group insurance contract makes a fraudulent claim. Again, we do not think that these clauses are controversial and we are content for them to stand part of the Bill.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Clauses 15 to 18 ordered to stand part of the Bill.

Clause 19

Power to change meaning of “relevant person” for purposes of 2010 Act

Question proposed, That the clause stand part of the Bill.

[The Temporary Chair (Mr Christopher Chope)]

With this it will be convenient to consider clause 20 and schedule 2 stand part.

Child Benefit

Debate between Christopher Chope and Cathy Jamieson

Tuesday 22nd May 2012 Westminster Hall

[Mr Christopher Chope (Christchurch) (Con)]

I congratulate the hon. Member for City of Durham (Roberta Blackman-Woods) on securing this debate, which follows up debates during the Budget, during Second Reading of the Finance Bill and on clause 8 of the Finance Bill, and a similar debate before the Budget in this Chamber, which I had the privilege of introducing.

As the hon. Lady said, we have never had a satisfactory answer to why, if it is necessary to find a greater contribution towards reducing the deficit from those on higher earnings, we are targeting people on higher earnings with children, rather than those who do not have children. If my hon. Friend the Minister wishes to intervene at this stage and give the definitive reply, I shall happily give way.

The hon. Lady mentioned loss of support among Conservatives. I am worried and do not wish the Conservatives to lose support, which is why I have put a lot of energy into trying to ensure that this legislation is improved. If the Opposition had just asked to look at clause 8 during the Finance Bill debate on the Floor of the House—we considered clause 8 and schedule 1—we could have discussed the principles and referred to schedule 1, and those privileged to serve on the Finance Bill Committee would then have been able to consider the schedule in more detail. It is now apparent, according to the report by the Institute of Chartered Accountants in England and Wales, that an enormous amount of detail needs line-by-line scrutiny. Sadly, as a consequence of the earlier debate, such scrutiny cannot now be delivered, given the structure of the Committee stage of the Finance Bill, because schedule 1 has already been considered. That is a problem. I shall not ascribe blame or responsibility for that, but it means that the Government do not have the benefit of detailed scrutiny of the workability of their proposals, or, as in this case, the lack of workability.

We have a real problem. I hope that the Opposition spokesman, the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), will say what she thinks we can do to bring this issue back on Report in a form that finds favour not just with me and my hon. Friend the Member for Rochester and Strood (Mark Reckless)—two Conservative Back-Benchers. Incidentally, we happen to be men and it is all ladies on the Opposition Benches this morning. Let us see what we can bring about.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

I hear what the hon. Gentleman says about clause 8 and schedule 1. We proposed to delete the schedule, as well as the clause, because it was a shambles. However, I hear what the hon. Gentleman says about Report. I am more than happy to consider what we can do together, because, of course, we want the Bill to come out of Committee better than it went in.

[Mr Chope]

I am grateful to the hon. Lady. On such issues, there is a slow fuse as far as members of the general public are concerned. They do not realise what the implications are until quite a long period has elapsed. We must look to people from outside the House—third parties, perhaps—to try to alert our constituents more to the full implications.

--- Later in debate ---

[Cathy Jamieson]

I thank my hon. Friend for that intervention. I was not going to point out that the Minister seems to be on his own this morning. I am sure that none the less he is very capable of dealing with the questions that have come up and will receive inspiration from various sources in order to do so. However, I will take the opportunity to repeat gently the advice that I tried to give the Minister during the discussion on the Floor of the House: “When you’re in a hole, it’s better to stop digging and find a ladder to get yourself out of that hole.” At that time, we were suggesting that we would be willing to work with the Government to see what could be done to mitigate the worst outcomes of this flawed policy, and that offer still stands.

[Mr Chope]

If I were the hon. Lady, I would take comfort from the fact that there are no Back Benchers here, because it shows that notwithstanding the very powerful Conservative Whips Office, they have not been able to dragoon anyone into coming here to support the Government’s policy today.

[Cathy Jamieson]

I thank the hon. Gentleman for that intervention. It is not for me to interpret what the Conservative Whips Office is able to do to deliver people to the debate and ensure that they turn up. None the less, we have heard some very powerful speeches, not least from the hon. Gentleman himself.

Finance (No. 4) Bill

Debate between Christopher Chope and Cathy Jamieson

Thursday 19th April 2012 Commons Chamber

[Mr Chope]

I rise to speak to amendment 9 and the other amendments in the group, standing in my name and that of my hon. Friend the Member for Gainsborough (Mr Leigh). We face a rather unsatisfactory state of affairs, because the guillotine will fall at 6 o’clock, which means that we have precisely 52 minutes to discuss the whole of clause 8 and schedule 1, which deal with child benefit and will affect 1.2 million families up and down the country, potentially yielding £1.5 billion for the Exchequer. How can one do justice to the complexity of what the Government are proposing in this short space of time?

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

indicated assent.

--- Later in debate ---

[Mr Chope]

If I am given the opportunity, and if I do not succeed in persuading the Government of the merits of amendment 28 in particular, I shall feel obliged to vote against both the clause and the schedule. I think that by then we shall have done everything possible to try to persuade the Government to change their mind., and if they do not want to change their mind, I shall feel duty bound to express my view in the Lobby accordingly.

The Treasury figures show that there are 840,000 households with children in which at least one person earns over £60,000 a year. I have proposed that everyone earning over £60,000 a year should pay a standard tax increment of about £1,000, which would generate about £2 billion. The 840,000 people in households with children would be only £300 better off, or a bit more, depending on how many children they had. There are approximately another 1.1 million people with taxable incomes of over £60,000 who do not have children. If everyone earning over £60,000 paid an extra £1,000, we would not have to bother with this very partial project of penalising families with children.

I am not suggesting that as a definite solution. I should much prefer, for example, to reduce our contribution to the European Union. [Hon. Members: “Hear, hear.”] However, it would at least be fairer and more consistent with the Government’s avowed intent that those on higher incomes should contribute more to deficit reduction.

Amendment 9 proposes that the

“High-income child benefit charge”

in clause 8 should be described as a higher-income charge. I do not think it accurate to describe someone earning over £50,000 a year as having a high income—although such people may have a higher relative income, as is apparent from the CARE figures that I gave earlier. Funnily enough, HMRC’s own Budget document refers to

“Child Benefit: Income Tax Charge for Those on Higher Incomes”.

I hope that my hon. Friend the Minister will accept that the charge in clause 8 should also be described as a “higher” rather than a “high” income charge. Under the heading “Policy objective”, the document states:

“In order to address the fiscal deficit the Government believes that it is right to ask those on higher incomes to contribute more.”

Obviously mine is a small amendment in comparison with the more substantial ones. If the Government are unwilling even to concede that point, it shows that the degree of stubbornness in the Treasury is even greater than many of us thought.

Is the high-income child benefit charge classified as a tax? I tabled a question to that effect that was due to be answered on Monday, and have just received a written answer from my hon. Friend the Minister—it should have been given then, but I understand the reason for the delay—which states:

“Classification is a matter for the independent Office for National Statistics.”

Effectively, we are talking about a new tax on people with particular incomes, rather than about removing child benefit from them. I have every belief that, in due course, the Office for National Statistics will classify this as a tax.

The Government have been keen to emphasise the need to cut expenditure, and not so keen to introduce tax increases. That may be why they have been rather coy about admitting that this will probably be a tax increase for definition purposes rather than a cut in benefit. My amendment 28, on which I hope we shall have an opportunity to vote, would ensure that there was no unfairness in the treatment of families with identical incomes. The single-parent trap and the couple penalty would be avoided, and the objective that taxes must be fair and simple would be met. This tax is neither fair nor simple.

We were discussing the granny tax earlier, and I would describe the measure now under discussion as a tax targeted at mummies and daddies in the squeezed, hard-working middle. People on equivalent incomes without parental responsibilities have nothing extra to pay and some households on joint incomes with children will also pay nothing, whereas single parents earning over £60,000 will pay a minimum of £1,300 a year more than before, and some of them will pay a lot more than that. This cannot be right. I hope the Minister will say the Government have had second thoughts and are minded to withdraw their proposal.

[Cathy Jamieson]

I will be as brief as possible, as I am aware that there is not much time left.

There are two key issues: the principle of what child benefit is supposed to be for, and the practical implications of the Government’s proposals. I want to emphasise the word “child” because we have lost sight of the fact that we are talking about children. The Child Benefit Bill introduced in May 1975 by the then Labour Government, with all-party support, was intended to offer a universal, non-means-tested, cash-free tax benefit for the good of all children. At its simplest, it was designed to ensure that mothers had money paid regularly into their purses, giving them at least some form of stable income, and that the money would be used for their families.