Insurance Bill [HL]

Lord Carrington of Fulham Excerpts

Tuesday 29th July 2014 Grand Committee

[Lord Carrington of Fulham (Con)]

My Lords, I do not intend to detain the Committee very long, but I just want to say how pleased I am that we have before us today this modest little Bill. I hope that we will find, as we get into the detail, that it is largely uncontroversial, simplifying and clarifying as it does the responsibilities of both the insured and the insurer in narrowly defined circumstances. Anything which brings clarity into the insurance market must be welcomed by everyone.

I have spent a lifetime in financial services—when I was not being a Member of Parliament—and, indeed, I still am closely involved as deputy chairman of a small bank, as in the Register of Lords’ Interests, but I should add that I was never in the insurance industry. I reckon that I am reasonably financially savvy, but I have never been able to work out how the insurance industry calculates its risks and arrives at the premiums that it demands from its clients. Obviously, statistical analysis of the probability of an event occurring plays a large part, but I suspect that some elements in the insurance industry have not been above exploiting the ignorance of the insured to refuse to pay out a valid claim and, equally, that some of the insured have not been above making questionable and at times fraudulent claims to the cost of all of us.

I remember that, years ago, I was asked to lend a large amount of money to an insurance syndicate. A senior underwriter took me through all the risks and the small probability that it would have to pay out to the insured under the policy. When I insisted that I still thought the risk was not, to use the jargon, “bankable”, he explained that the documentation was so confusingly written that he was sure that, even if a valid claim was made, it would be capable of being refused by the underwriters. Noble Lords will be glad to know that I did not make the loan. The claims that came in eventually, some of which were highly questionable, bankrupted the syndicate. However, this was a long time ago, and I am sure things have changed. By clarifying the relationship between the insured and the insurer, this Bill makes a start on bringing a welcome openness to the relationship.

In this Bill, I particularly like that the insured has to provide information to the insurer in a clear and accessible manner and that it specifies what information insurers can reasonably be expected to know. I hope that this will go a long way towards removing areas of misunderstanding between the insured and the insurer. Equally, the requirement is long overdue for the insurer to be transparent about disadvantageous terms in the policy.

This little Bill is stuffed with useful things and takes us further along the path of openness between the insured and the insurer. I look forward to its coming into force in due course.