Consumer Insurance (Disclosure and Representations) Bill [Lords]

Debate between Jonathan Evans and Stephen Phillips

Tuesday 6th March 2012 Commons Chamber

[Stephen Phillips]

I am not for a moment suggesting that the Bill should not be scrutinised.

Insurance companies ought to pay claims that they have not paid previously as a result of an inadvertent misrepresentation or non-disclosure—everyone wants that change, which is the reason for the Bill. The only way in which the costs of the types of insurance contract that the Bill covers will increase is if claims that ought previously to have been paid—legitimate claims—are paid. Disreputable insurance companies—I venture to suggest that there is none left in this country—currently might decline to pay a claim on a specious basis. For that reason, the review proposed in the new clause is unnecessary. I anticipate that the Government will not wish to carry it out, and the hon. Gentleman is rather hoist on his own petard because of the argument he has made in support of the Bill.

[Jonathan Evans]

My hon. and learned Friend will know that arrangements are in place for the Financial Ombudsman Service to look at the circumstances to which he refers—when an apparently proper claim is declined by an insurance company on specious grounds. Notwithstanding the 1906 Act, the financial ombudsman has, under the “treating customers fairly” provisions, which were put into operation by the Financial Services Authority, many times ordered a payment to be made. Is that not one of the reasons for the Bill? The situation will be that legislation rather than the financial ombudsman will be involved in righting wrongs.

[Stephen Phillips]

My hon. Friend makes a valid point. The insurance industry has long been regulated and the ombudsman has long been able to make declarations, but there are circumstances in which one cannot go to the ombudsman—for example, if the financial value of the contract is too high. There are circumstances in which the ombudsman will not intervene—for example, if legal proceedings between the consumer and the insurance company or, if Lloyd’s, some other insurer, are already afoot. In addition, experience dictates that the financial ombudsman is not, for example, particularly au fait with some of the more obscure parts of insurance law with which the Bill grapples, such as those parts of common law that deal with basis clauses and the turning of representations into warranties when made the basis of the contract.

I hear, then, what my hon. Friend the Member for Cardiff North (Jonathan Evans) says, but it is fair to say that the Bill is not only welcome but contains proposals that the Law Commission has properly considered and requires no review of the type that the new clause contemplates. For those reasons, the new clause is, in my respectful view, misconceived; and for those reasons, I am sure that the hon. Gentleman will not push it to a vote.

[Mr Christopher Chope (Christchurch) (Con)]

I was rather attracted to the new clause tabled by the hon. Member for Nottingham East (Chris Leslie). The idea that the House should engage in post-legislative scrutiny is a good one and accords with good legislative practice. That, effectively, is what he is saying. He is not saying that the House would necessarily be involved; he is saying that the Treasury, the Department sponsoring the Bill, would have an obligation to assure everybody about the impact of legislation. This could be an important precedent. Perhaps, in due course, it will be part of official Opposition policy to provide for post-legislative scrutiny.

This area of insurance is extremely complicated and, as the hon. Gentleman said, very expensive for many people. The reason it is so expensive is that there is an enormous amount of fraud, particularly in relation to motor accidents. We heard recently about the high incidence of claims for whiplash. Almost everybody involved in even the most minor bump is encouraged to claim on their insurance for whiplash injuries, and invariably the insurance companies end up paying a lot of money to prevent what they would describe as nuisance claims from going to full litigation. Effectively, they are held to ransom, and not surprisingly it is the customers of those insurance companies who end up paying the bill through higher premiums.

That situation is particularly pernicious with compulsory insurance, which motor insurance is—third party, fire and theft, and so on—for people seeking to drive a motor vehicle on the road. It is particularly tough on young people, and has been made tougher by this ludicrous European legislation declaring that insurance companies cannot take account of whether a young girl belongs to a class group with a lower claims rate than a young man who belongs to a group with a higher claims rate and who therefore will face additional costs.

As a consequence, the premiums for young women have increased significantly faster than premiums for young men. I suppose I have a family interest, because my daughter has recently acquired her first car and taken out her first insurance policy. I can reconfirm what the hon. Member for Nottingham East said. Obviously, she did not have a no-claims record, because she did not have any driving experience, and in the end, the best deal was from a company offering her 10 months’ insurance, which gave her the prospect of getting a no-claims discount after 10 months rather than after a year.