Consumer Insurance (Disclosure and Representations) Bill [Lords]

David Nuttall Excerpts

Tuesday 6th March 2012 Commons Chamber

[Chris Leslie]

I beg to move amendment 1, page 1, line 22, at end insert—

‘(3A) It is the duty of the insurer to show regard to the principle that a burden or restriction which is imposed on a consumer through requests for particulars before a contract is entered into should be proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction.’.

If hon. Members look at line 22 of page 1, right at the foot of the Bill, they will see a simple provision that states:

“It is the duty of the consumer to take reasonable care not to make a misrepresentation to the insurer.”

It follows a provision in clause 2—one of the most important in the Bill—that refers to the “disclosure and representations” that consumers need to make to an insurer

“before a…contract is entered into or varied.”

I tabled an amendment in Committee that was specifically designed to challenge the Government in respect of the burden that might fall on consumers under the new provisions in this Bill.

I support the Bill; I think it is important. I want more clarity and disclosure, as the contractual arrangement needs to be clearer and more transparent. However, there is a small alarm going off in the back of my mind—I have a minor anxiety—that we might unwittingly create circumstances in which an individual faced with having to answer a barrage of extra questions, or fill in page after page of forms that they perhaps did not have to fill in before, may well think, “I can’t be bothered with this particular insurance cover,” especially if they feel it to be a discretionary area of cover, rather than a mandatory area, such as car insurance. Faced with that weight of administration and bureaucracy, those individuals might say, “I just don’t have the time or the inclination for these dozens and dozens of questions,” and might therefore go without insurance cover when that would be neither a prudent nor wise thing to do.

Faced with a constituent in one of our surgeries who asked, “Should I take out household insurance cover?”, “Should I take out contents and building insurance”, and so forth, most of us would say, “Absolutely you should. You don’t know what’s around the corner. There could be any number of things that fate could bring upon your shoulders. Therefore, you really ought to regard this as essential.” In the dreadful economic circumstances that the Government are presiding over, many hard-pressed families might decide that certain things will have to give, and I am sure that the cost of insurance is on many people’s minds. Adding to the consideration of cost the idea that people have to go through onerous processes and jump through hoops to get the insurance could take a certain category of person to a tipping point. Such a consideration could be the straw that breaks the camel’s back, leading them to conclude that they just cannot be bothered to fill in the forms for that insurance cover at that point. Many of us will have been there. We will have seen a particular product and made a note in the diary to investigate it, but, when faced with the hurdle of filling in the forms and getting involved in the bureaucracy, we have found that it falls down our list of priorities. That is the point that I want to test with the amendment.

In Committee, I framed the amendment incorrectly. The amendment that I tabled at that point related to circumstances in which a consumer varies a contract that they have already taken out. As the Minister will know, when she reapplies for her car insurance, the insurer will already have details of her address and driving habits on record. Renewing an insurance contract is therefore not particularly onerous, because not all the questions need to be asked afresh. She will be able to tick a box to “re-answer” them. In Committee, the Minister explained that my amendment was unnecessary as there were ways of varying contracts quite efficiently.

I have therefore tried to reframe the amendment so that it relates particularly to new insurance contracts. It is aimed at the individual who has perhaps not had car insurance or owned a house before, and who decides to start from scratch with a new insurance contract. In the amendment—I hope that hon. Members will forgive the slightly flowery legislative language that is sometimes used in such provisions—I have proposed the addition of a new subsection:

“It is the duty of the insurer to show regard to the principle that a burden or restriction which is imposed on a consumer through requests for particulars before a contract is entered into should be proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction.”

I know that many hon. Members have concerns about regulatory burdens, but we must be careful, because regulations are sometimes necessary for the protection of individuals and of society at large. We should always keep a watchful eye on the burdens that such regulations impose, however.

The regulatory impact assessment that accompanies the Bill shows that the costs that will fall on the consumer will not be particularly onerous, which is why I support it in general terms. In pounds, shillings and pence terms, the costs will be negligible. The assessment estimates that an additional £700,000 a year will be saved by the insurance sector as a result of the provisions in the Bill, and that if there is an extra charge to consumers, it will probably be 2p or 3p for every £100 of insurance. I am therefore not concerned about the cost as a burden. The burden that I am flagging up is the administrative burden, the non-financial burden, that might fall on the shoulders of the consumer.

[Mr David Nuttall (Bury North) (Con)]

Will the hon. Gentleman tell us who will be responsible for determining whether the new duty that the amendment seeks to impose is being fulfilled?

[Chris Leslie]

Ultimately, the courts would have to be the arbiter in relation to those arrangements. This is the kind of thing that tends to get drawn into a judicial review, although I would hope that it will not need to be tested in that way. I am simply introducing a principle that I would like insurers to have regard to when they frame the questions, the tests and the requirements that they place on the shoulders of the consumer.

Under this Bill, insurers will be made to ask questions that are much more specific than has been the case up to now. People who find form-filling particularly onerous or difficult might decide that they simply cannot be bothered to go through the process, and they are the people I am worried about. This is not necessarily about people’s literacy levels, or their boredom thresholds or their propensity to fill in forms. This amendment is quite material to the Bill.

[Mr Nuttall]

So, in reality, the only way for a consumer to enforce this duty would be to take the company to court; otherwise, he would be relying on the good nature of the insurance company, would he not?

[Chris Leslie]

Indeed, that is the very nature of the measure, but that does not mean that, in the course of changing the disclosure requirements, we should not try to frame the duties that insurers have to abide by. I do not know whether hon. Members have visited moneysupermarket.com or confused.com recently. They are aggregator websites on which a number of insurance companies share the questions that people have to answer in order to take out an insurance contract. The websites show the range of insurance contracts that are available. Quite honestly, I think that the way the aggregator companies will deal with the Bill is another matter, but I challenge any hon. Member to say that their boredom threshold has not been reached after they have filled in 15 or 20 pages of a form. Having said that, I think that many hon. Members—especially those who are in the Chamber at the moment—must have particularly high boredom thresholds. I know that from many hours of experience in these debates. Notwithstanding that propensity to sit through long, technical discussions, however, I believe that form-filling is quite a different matter.

My point is about the administrative burden in relation to new contracts. I want us to ensure that we protect the section of society that I have been describing. I can envisage us all being visited at our surgeries in the years ahead by constituents telling us that they did not take out insurance not because of the cost but because the form-filling was just too much for them. They will tell us that they regret that, but that there were just too many questions to answer. I hope that the Minister understands why I have framed the amendment in this way. It is an important provision, and I hope that she will address it.