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I beg to move, "That the Bill be now read a Second time."
The object of the Measure which I have to lay before the House is to remedy certain evils in the insurance world, which have lately attracted a great deal of public attention. Recently the failures of insurance companies transacting motor vehicle business caused widespread uneasiness and undoubtedly a certain amount of hardship both for policyholders in those companies and for innocent third parties. After carefully considering a number of suggested remedies, the Government propose to deal with the matter by way of amendment of the Assurance Companies (Winding Up) Act, 1933. Under that Act, the Board of Trade was given the power to petition the court for the winding-up of an assurance company on the ground that it is unable to pay its debts and also certain powers to obtain information with a view to determining whether a certain company was insolvent or not.
Those powers have been of considerable value and certain companies have been wound up under the provisions of the Act of 1933. There is no reason to doubt that but for these provisions they might have continued their careers for a substantially longer period, to the public detriment. Among the insolvent assurance companies wound up in recent years were the South and East Lancashire Co., 1931, the Port of Manchester Insurance Co., 1933, the North and South Insurance Corporation, 1933, the Anglian Insurance Co., 1935, and the London General Insurance Co., 1935. Under the Act of 1933, however, action by the Board of Trade could only be initiated
if it appears to the Board of Trade that there is reasonable ground for believing that an assurance company is insolvent.
But we have been advised that evidence, and not mere suspicion of insolvency, however strong, is necessary before steps can be taken to obtain information from the company. In those circumstances it has been the ill-luck or misfortune of these companies to have carried on after they had ceased in effect to be solvent, and we had no power with which to deal with the companies until their insolvency was shown on evidence. Statutory machinery appears to be required which will enable the doubtful companies to be quickly detected and kept under effective supervision.
Clause 1 of the Bill, which replaces Section 2 of the 1933 Act, provides that:
The Board of Trade may, by notice in writing served upon an assurance company, require it to furnish to the Board within such time as may be specified in the notice, such explanations, information, etc., as the Board consider to be necessary, for the purpose of determining whether the company is insolvent.
If the company does not comply with these requirements or if the Board, after considering the material furnished, nevertheless consider that course expedient the Board may notify the company that they propose to appoint one or more inspectors to investigate the company's affairs, and if the company does not, within seven days, give notice in writing, that it objects to the appointment, the Board may make the appointment. When the inspectors have been appointed they can investigate the state of the Company's finances and make a report that would lead at once to a winding-up
order being issued. This simple way of dealing more promptly with these cases has been under discussion for some time past. I have conferred with the British Insurance Association, which represents substantially all the leading insurance companies carrying on business in the United Kingdom. The Association takes the view, and has expressed it strongly to me, that the proposed Measure does not go so far as it would like, in that it does not bring within its scope all classes of insurance; its operations being confined to the assurance companies. The companies have expressed that view in relation to other possible insurance legislation. I am glad to be able to say, however, that the Association recognises the urgency of the present problem and appreciates that more comprehensive insurance proposals would require more time for discussion in Parliament than can be spared. Being unwilling to hamper the Board of Trade in what they regard as a step forward in the right direction, the Association have indicated to the Board that, while the companies have not departed from their previous views as to the scope of insurance legislation, they agree with the principle of this Bill. It is only fair to the companies, however, to say that they must not be taken as having altered or in any way departed from the view already explained to the Board by them. There are very few cases in which it may be necessary to use the powers given in this Bill, but such as they are we can deal with them very promptly. The insurance world in London, very fortunately, bears a high reputation, and all that we require to do is to weed out those companies which are of doubtful reputation and which cannot give sound cover for their transactions. It is with that object that the Second Reading of the Bill is asked for to-night.
We are very glad to assist in the passage of this Bill, which, though a very small Measure, undoubtedly gives a rather greater amount of control over companies which are liable to lead their subscribers and third parties and policy holders into great difficulties by carrying on when they are really bankrupt and not in a proper position to carry on. We take the view which has been expressed by the British Insurance Association that a very much more thorough investigation is required and that much more thorough means are required for putting this matter right. To enable the Board of Trade to step in at an earlier stage is not a satisfactory or final solution of the problem. Indeed, that solution will not come until the insurance business is nationalised and completely carried on by the Government itself. This sort of expedient shows the impossibility, once we reach the stage of compulsory insurance, of carrying on with private insurance companies. We are making people insure against third party risks with motor cars and leaving them to be protected by private companies, and the result will be what we have seen in the last few months. I should like to ask the right hon. Gentleman whether it has been possible to do anything with regard to the third party claims of those motor insurance companies that have gone bankrupt. He said at an earlier stage that if these claims were forwarded to the Board of Trade he would see whether anything could be done in the matter. We have all come across hard cases where people were relying upon the compulsory third party insurance—which they were entitled to rely upon as it was part of the law of the land—and where they found, in spite of that reliance, that they were unable to recover anything from someone whom they believed to be properly insured. We shall be much obliged if we can be told how that matter is progressing.
I do not wish to delay the Second Reading of this Bill, which is brought to the House by the President of the Board of Trade as a first expedient for dealing with what is undoubtedly a very difficult situation. I cannot think that anybody will refuse these powers to the President of the Board of Trade, if he is satisfied that they are going to be useful to him. As he has reminded the House, there has been in the last few years, since motor insurance against third party risk was made compulsory, a state of things which can only be described as a scandal. It must be recognised that, while this Bill gives him greater power of initiation through the power of appointing an inspector to make an investigation without immediate recourse to the courts, it does in fact do nothing to preclude the possibility of companies reaching the same position which led to the winding-up of four or five companies in conditions which left a large number of people seriously injured and caused suffering, not only to the insured, but to the third parties. The hon. and learned Gentleman suggested that nothing short of the nationalisation of the industry would do away with a recrudescence of evils of this kind. I do not wish to point out now ways in which the thing might be made water-tight, but I can think of several ways, and the British Insurance Association could of their own volition easily devise a scheme which would prevent a repetition of these miserable scandals. I might go so far as to point out that no scheme which does not relate the statutory deposit which has to be made by these companies to the amount of business to be transacted can really be effective. It will be necessary possibly by some system of audit, or annual licences, to make quite sure that there are at all stages of the company's history adequate reserves to cover all foreseeable risks of the kind which are being underwritten. That is a comparatively simple process. I recognise freely that at this stage of the Session the Government could not introduce a Bill which was not, in essentials, an agreed measure, and that may well be why they have not gone further and produced something which would really go to the root of the matter. This Bill is in effect a small Measure to provide more expeditious funeral rites for a company which may have got itself into difficulties, there is nothing which provides the possibility of a regulation of these evils. I have only intervened to make it clear that this Measure is not accepted as the last word, and I gather from some observations which fell from my right hon. Friend that he does not necessarily regard it as being the last word.
At this late hour I rise for no other purpose than to thank the President of the Board of Trade for the manner in which he has stated the position taken up by the British Insurance Association, as representing the great insurance companies of this country. It is true that while offering no opposition whatever to the amendment, the British Insurance Association still stress their firm conviction that the only proper way to deal with this subject adequately and comprehensively for the protection of the public is to take powers, not only in respect of the whole body of insurance companies, but also in the case of other classes of insurance. This, they feel, can best be achieved by the passing into law of the Insurance Undertakings Bill, which has now lain dormant for several years.
I wish this subject had come up earlier in the day, because many people want some action taken. Probably every hon. Member has had letters pointing out how people win cases in court but cannot recover compensation, and I am glad that some efforts are being made to deal with that difficulty. I wish the Measure had been more comprehensive, but I realise the force of the statement that that would have meant delay and that meanwhile these evils would have been going on. Quite recently, with the hon. Member for Morpeth (Mr. G. Nicholson) we got a Bill through the House protecting compensation in the mining industry, and in that case it was laid down that these insurance companies must have sufficient assets to meet the possible or probable liabilities that they will encounter. Unless we can assure such a provision in these cases we shall always be met with the difficulty of companies taking the chance of getting out of their liabilities by a failure. It is not fair to the public to allow that kind of thing to go on, and I want to express my gratitude that some little step has been taken to deal with the problem, while I hope that in the next Session, whatever Government is in power, we shall have a more comprehensive Measure.
I shall support this Bill, but I must say that the necessity for its introduction reflects no credit on the Board of Trade. There was a departmental inquiry in 1924 into the working of the Act of 1909, and as a result certain suggestions were put forward which are now in part, embodied in this Bill. In 1933 the President of the Board of Trade brought in a fatuous Bill, which was of no use, because power to compel a company to do that which the report suggested—if it neglected to do so voluntarily—was omitted. Now we are brought to the point where this Bill will allow the Board of Trade to compel a company to lodge accounts, if the Board cannot get them voluntarily, for inquiry. It is necessary, in view of what was said by the hon. and learned Member for East Bristol (Sir S. Cripps), to say—although the President of the Board of Trade will not, I hope, take this to himself—that all the while, the Board of Trade have been trying to find a way, but have failed to do what they would have also failed to do if insurance had been nationalized.
The great insurance companies have nothing to fear. This Bill will not touch them, with their granite foundation of solvency and their cast iron funds. They are perfectly willing, and always have been, to show, every day of the week, everything that is necessary with regard to their funds. They desire to do so, because it shows the public how strong they are. The Bill will not touch them. It is aimed at the companies which are insolvent. For years the Board of Trade have been trying to find reasons why they should not act, instead of trying to find reasons why they should. They found half a reason, and embodied it in the Act of 1933. The Bill is a step in the right direction, but who is going to move the Board of Trade to look into the position of the companies? The Board will not want to go spying about those offices. Nothing will be done effectively about this problem until you take the Board of Trade by the scruff of the neck and rub their noses in it, as has happened after the losses in third party insurance by the fact that mushroom companies have gone smash. Public opinion has forced the Board of Trade to look into this question of insolvency. Even after this Bill is in force, the Board of Trade will say to small companies: "We are not going to spy on you." Who is to tell us of the position of those companies and ask us to look at their books? The Board of Trade will be very right not to move without good reasons because if they examined the position of a small company and the company by chance were solvent, the mere rumour of that challenge would wreck the credit of the company and do harm to policy holders.
I submit that the Bill is nonsense and ought to be held up to ridicule. It ought to be hung up in every department of the Board of Trade to show what comes of the Board trying to find reasons for not doing things. We ought to have a standard laid down in the Bill to which all insurance companies ought to conform for solvency. The big offices would welcome such a provision, I am sure, and the insolvent company would be brought into line and forced to lodge solvent accounts. The Government would then protect the small man from being swindled by insolvent companies. An hon. Member made a very good point when he asked what was the good of requiring a small deposit of £15,000 with the Board of Trade when the company could take risks up to £200,000 or £300,000. The ratio of deposit to risk is disproportionate, and is one of the most important things which ought to be dealt with. Then, again, the Bill deals only with companies? Why? Are there not such things as insurance syndicates or mutual clubs, or firms who insure, and who might let down a third party insurer just as easily as a company? But the Bill will not touch them. Although we shall support the Bill, we shall not let it go through without realising that it is a contemptible Bill which does not touch the dangers which ought to be touched.
It has been my painful lot to have to deal with a number of cases of distressing hardship at the liquidation of certain of the companies which have been mentioned by the right hon. Gentleman to-night. While, with certain reservations, I welcome the Bill, I share the apprehensions of my hon. Friend the Member for East Birkenhead (Mr. White) as to whether it will accomplish the object that we all have in view. I hope that the Government will not regard this Bill as their last effort to ensure the obviation of the evils which have existed in the past.
I feel that it would be a pity if, from the report of this debate, the public gained the impression that the present Bill will give them any more security than they have at present. It will not. I agree that it is desirable that the Board of Trade should have these additional powers, but they will only enable the Board of Trade to wind up an insolvent company a little sooner than it could under the previous Act. With regard to deposits, it seems to me that, when the Government, in the Act of 1930, insisted on the public insuring against third-party risks, and when they gave to an insurer—whether a company, a body of underwriters, or a mutual association—on the deposit of £15,000, the title to be called an authorised insurer, and therefore a certain status in the eyes of the public, they ought to have carried the principle a little further by insisting that an inspector should be put in; and the time to put in an inspector is not when the company is thought to be becoming insolvent, but before it is allowed to issue policies. I suggest that the Government should consider going into this matter thoroughly, not from the point of view of the Departmental Committee's report, which affects everyone, but from the point of view of motor insurance, to which this Bill is mainly directed, and which is really the most urgent matter. While I support the Bill, I hope that it will be followed by something better.
Everyone who has spoken has agreed that this Bill does nothing for the victims of accidents where the companies are liable. The President of the Board of Trade has said that the Bill gives him power to step in, but he has not told us when he will step in. Will it be when the companies are insolvent? In many cases the money awarded by the courts to victims of accidents has not been paid. A case was brought to my notice in Glasgow where two people, one of whom was the breadwinner, were killed, and seven seriously injured, and those people did not receive a single penny. A Member of this House was the chairman of the company that was responsible for the payment of compensation in that case. There is a feeling abroad, whether it be right or wrong, that those people ought to have been prosecuted for carrying on business when they knew that they were insolvent, and the public are entitled to an assurance that something of that character will be done. We have men in this House who, we are told, are chairmen of what are called by the President questionable companies. They go about parading their personal wealth, and at the same time are chairmen of insolvent companies, and poor people are denied the protection to which they are entitled. We are entitled to some assurance from the Minister on this point.
We have motorists who insure. They think that they are protected, and then suddenly they discover that their company is insolvent. They may be persons of small means, but they become liable to people who are injured, and they may become completely bankrupt because of the claim that is made on them after they have made adequate provision according to the law. The law has laid it down that they shall insure; they do insure, they pay their premium, and then they discover that they are not protected in any way. That is a startling state of affairs. If the Government were doing the right thing, they would take powers to try people who carry on companies of that description when they know that they have not the resources to meet the demands made on them. It is a question for the Attorney-General. He should consider whether the people who run these companies should not be placed in the dock and tried for fraudulent practices against the people of this country. This Bill is totally inadequate; it is an insult to the public of this country, who are entitled to adequate protection. If the Government make the law such that people are bound to insure, they ought also to tighten up the law so that companies of this kind should not be able to carry on.
With regard to the question put by the hon. and learned Member for East Bristol (Sir S. Cripps) as to what is to happen in the case of third party risks where liabilities have been incurred by companies which are now in liquidation, it is early in the day. The liquidation proceedings are now going on. On the conclusion of those proceedings we shall know where we stand and where they stand, and we shall have to consider what steps can be taken to protect the interests of those concerned.
Let us see what happens to the liquidation proceedings. The hon. Member for East Birkenhead (Mr. White) and others have said that this Bill is inadequate. It only deals with what is an urgent necessity. This appears to be the best way of dealing with the thing at the moment. The hon. Member for Shettleston (Mr. McGovern), who feels very strongly on the subject, asks whether anything will be done in the way of prosecution. The liquidation proceedings will throw some light on the details of these cases, and will provide us with material on which action can be taken if action is proper. I hope the hon. Member realises that we already have some powers which are adequate for this purpose. What is aimed at in this Bill will enable us to deal with rather questionable cases before they have reached a stage where you can claim winding up on evidence alone. We want to act a little in advance.
I had occasion to communicate with the right hon. Gentleman about a case in my constituency. If I could advance evidence that a person is faced with bankruptcy through having to meet a liability which should have fallen on an insurance company, would he be prepared to go into a case of that kind?
That obviously is a matter that would he considered in the course of the liquidation. If the hon. Member has any specific case to bring to my attention I will look into it and see whether any steps could be taken which would be likely to be effective. This is only a small measure. It is taken at this period of the session because we do not want to lose time, but it does not preclude us from dealing later with the larger question.
The hon. Member must be well aware that I cannot pledge the time of the House for a session which has not yet opened. I have told him that the matter is receiving and will receive further consideration. I cannot go further than that.