Clause 47 - Insurance

Building Safety Bill – in a Public Bill Committee at 2:00 pm on 23rd September 2021.

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

Photo of Christopher Pincher Christopher Pincher Minister of State (Department for Levelling Up, Housing and Communities)

I know that this clause is of some interest to members of the Committee, so I shall make some remarks and then address any questions or debating points in my concluding remarks.

The clause relates to the legal requirements for insurance for private sector building control professionals. When the private sector competitive element was introduced in 1984, a requirement was included in the Building Act of that year for approved inspectors to have “adequate insurance” from a Government-approved scheme in relation to the work that they supervise. The Bill maintains the double protection of requiring adequate insurance from a Government-approved insurance scheme. We believe that that is a sensible protection for approved inspectors, consumers and the construction sector.

The Bill also maintains the current requirement for approved inspectors to prove that they have insurance before they can obtain permission to start work on a new project—also known as the initial notice process. However, there have been difficulties in the past with a limited number of approved insurance schemes and no set definition of what constitutes the adequate insurance required. The problem worsened when it coincided with much wider insurance market changes, especially in 2019, and a reduction in the level of risk that insurers were prepared to accept. That led to cases of approved inspectors being unable to obtain insurance cover and, therefore, to operate. The number of approved inspectors involved was already small, but the effects on ongoing projects and local authorities that had to pick up the work were noticeable.

The Bill makes two main changes to reform and address that situation while keeping the fundamental requirement for insurance for approved inspectors. The first is a duty to prepare and publish guidance on what is adequate insurance cover. The second is the ability for the Secretary of State to designate bodies to undertake the functions both of joined-up guidance and of approving insurance schemes.

Photo of Selaine Saxby Selaine Saxby Conservative, North Devon

Who might the Government approve to do that work on their behalf? Will it be part of the Building Safety Regulator’s role?

Photo of Christopher Pincher Christopher Pincher Minister of State (Department for Levelling Up, Housing and Communities)

Over the next few weeks and months we will assess all potential organisations that might undertake that role. They will need to demonstrate expertise and capability, to determine whether they can meet the high standards set by any prospective building control insurance scheme. We will pursue an answer to that question over the next several weeks and months. I will be happy to update the House as we progress through that process.

Photo of Marie Rimmer Marie Rimmer Opposition Whip (Commons)

Sadly, the construction industry does not enjoy a lot of confidence, which is no surprise, mainly because of the fires we have had. Professional indemnity is very difficult to get; far more questions are being asked to obtain it. The Association of British Insurers has been very involved with the Government and is broadly very supportive of the Bill—it is the right step and will improve the building industry and commercial and residential premises. However, the ABI has made a number of significant comments about using modern methods of construction

“to ensure these buildings are built and maintained in a way which enables them to access affordable insurance for the lifetime of the property.”

It has also called on the Government to develop

“a publicly accessible database of buildings developed using Modern Methods of Construction which provides information on the materials used, methods of construction and relevant standards or certification” and to mandate

“the installation of high integrity fire alarms in all new developments to address the high number”—

Photo of Clive Efford Clive Efford Labour, Eltham

Order. This is meant to be an intervention.

Photo of Marie Rimmer Marie Rimmer Opposition Whip (Commons)

I do not consider that the Bill will address all the insurance problems. I am concerned that we may end up in a situation where we do not get the buildings done, because of the insurance problem. I do not believe that we can do everything in the timescale to enable the construction of the homes that we need—

Photo of Clive Efford Clive Efford Labour, Eltham

Order. Can I say gently that we have not had much deliberation in this Committee, so I am loth to shut this down, but rather than making a long intervention, the hon. Lady should make a speech. I am sure the Minister will answer your points equally well whether you make a speech or an intervention. We cannot have interventions of that length. I assume the hon. Lady is finished.

Photo of Marie Rimmer Marie Rimmer Opposition Whip (Commons)

I will endeavour to find out how to make a speech when it is appropriate, and I will then do so.

Photo of Christopher Pincher Christopher Pincher Minister of State (Department for Levelling Up, Housing and Communities) 2:15 pm, 23rd September 2021

I am obliged to the hon. Lady. I understand the point that she makes, which does bear 30 seconds of explanation. We are working with the modern methods of construction expert Mark Farmer to find ways of standardising the modern methods of construction sector. The off-site construction standards mechanisms that have been developed over the last few years to respond to that new marketplace give lenders and insurers adequate protections and assurances. Her point speaks to the wider issue that, in an evolving building terrain, where new methods of construction are being constantly developed, it is right that we have a flexible building safety regime to respond to those concerns. That is one of the reasons why, rather than placing lots of regulations and requirements in the Bill, we are using secondary legislation and regulations to respond to that evolving terrain. I think that modern methods of construction will be one of the areas in which the terrain responds.

Photo of Marie Rimmer Marie Rimmer Opposition Whip (Commons)

I should not apologise, because I need to make a point. There is too much dependence on secondary legislation, and we do not have sight of it. When will it be introduced? I like to make informed decisions, but I am not able to when there is this constant reference to future regulations and secondary legislation. When I get to read about the regulations, it says that they are subject to or delegated to statutory instruments, so I am going from the Bill to secondary legislation and then to statutory instruments. Will they be affirmative or negative? I do not feel in a position where I am able to make an informed decision.

Photo of Christopher Pincher Christopher Pincher Minister of State (Department for Levelling Up, Housing and Communities)

I am grateful to the hon. Lady. I would say, somewhat reflecting what Justin Bates said in evidence a couple of weeks ago, that we could put a great deal in the Bill—in primary legislation—but that would make the law exceptionally unwieldy and unresponsive to the developing terrain of building assurance, building safety and methods of construction. As Mr Bates pointed out, it would also mean that we would have to sit here from now until some time in 2022 for line-by-line consideration of the clauses in the primary legislation. Secondary legislation allows us to be flexible and respond to the changing terrain, while also giving Parliament an appropriate degree of scrutiny and control.

Photo of Daisy Cooper Daisy Cooper Liberal Democrat Spokesperson (Education)

It is a pleasure to serve under your chairmanship, Mr Efford. Given that the Government intend to use secondary legislation to such a large extent, does the Minister accept that it is vital that all stakeholders, particularly leaseholders affected by the legislation, have sufficient time to scrutinise it?

Photo of Christopher Pincher Christopher Pincher Minister of State (Department for Levelling Up, Housing and Communities)

The hon. Lady makes a fair point. She will know that we often consult on secondary legislation before laying the regulations, so that there is time for the community, in its widest context, to give feedback on that legislation. Whether the regulations are subject to the affirmative or negative procedure, there is ample opportunity for Parliament and the House of Commons to consider them, have a say and scrutinise that secondary legislation, either in a Committee such as this for the affirmative procedure, or with the entire Chamber praying against regulations subject to the negative procedure.

We have already published secondary legislation and a number of factsheets to support the primary legislation. We will continue to do so throughout the parliamentary process, which, I remind the hon. Lady, is likely to be longer rather than shorter; this Committee stage will be followed by Report. There will be ample opportunity for the Committee and the House to look at the legislation and the regulations and to comment and vote on them.

The insurance market for approved inspectors is intricate and some bodies have specialist insurance expertise in this area. The power in clause 47 will enable the Secretary of State to appoint specialist bodies to undertake this important and complex work, as the hon. Member for St Helens South and Whiston alluded to, where the Government think that appropriate. I commend the clause to the Committee.

Photo of Mike Amesbury Mike Amesbury Shadow Minister (Housing, Communities and Local Government)

I thank the Minister and other Members for their helpful contributions. As has been said, insurance, particularly professional indemnity insurance, has caused considerable debate and angst, not only for the professionals involved, but about the future role of the accountable person and those involved in building control. The ABI and AXA refer to that in their submissions.

Members have spoken about secondary legislation. The market has to respond to this measure, and that is why more detail would have been helpful. The Minister’s comments on consulting key stakeholders are constructive and reassuring. I assume that the ABI will be one of those stakeholders, and those discussions may be taking place not quite as we speak but over the next few weeks—I hope that that is the case. Ultimately, this is about ensuring that the clause and the new SIs provide adequate cover and deliver the culture change that we all want.

Photo of Shaun Bailey Shaun Bailey Conservative, West Bromwich West

I will keep my comments brief. I want to touch on whether primary legislation is the appropriate place to set out the specification.

I fully appreciate and do not disagree with the comments that have been made on the need to see the detail. I completely agree with the comments of members across the Committee about the need to consult and to ensure that stakeholders are appropriately engaged. If we put this in primary legislation, I think there might be a slight unintended consequence of pigeonholing it too far.

My interpretation of the ABI’s evidence is that there is a need to ensure that appropriate stakeholder feedback is reflected in regulation. In other areas, it is not uncommon for insurance mechanisms such as those in clause 47 to be delegated to secondary legislation, because it allows time for that engagement and the pulling together of stakeholders. It also allows for drilling down into the detail, because that secondary legislation can focus specifically on those really important points. As my right hon. Friend the Minister has said, it is appropriate to delegate to secondary legislation, but I also agree with the points raised by the hon. Member for St Helens South and Whiston. There is concern in the industry, as we have heard, particularly about incidences of fire and the inability to obtain appropriate insurance. Clause 47 seeks to remediate that and to interlink that more widely, so that we can have the safety we have been talking about and the cultural change that the hon. Member for Weaver Vale mentioned a moment ago.

This is an important but technical debate on whether primary or secondary legislation is the appropriate place for the requirements in clause 47. Broadly speaking, I think my right hon. Friend is right, but I say to him again, and this has been echoed across the Committee, that Members are seeking to ensure the broadest level of engagement with different stakeholders as this progresses. That will be important in ensuring that the subsequent legislation that feeds off clause 47 reflects accurately what we are trying to bring about and, ultimately, that the clause achieves its aims.

Photo of Ruth Cadbury Ruth Cadbury Shadow Minister (Housing, Communities and Local Government) (Planning)

I share the concerns about what is happening to the insurance industry in the context of building safety. I also share the concerns raised by my hon. Friend the Member for St Helens South and Whiston about the Bill’s reliance on secondary legislation for so many elements, including insurance.

I want to highlight a couple of issues that the insurance industry has raised with us. We have had submissions from AXA—one of the biggest insurers in the country—and from the Association of British Insurers, which says that it is

“concerned that significant detail is left to secondary legislation.”

The ABI has raised specific concerns about the availability and affordability of cover for fire safety works, an issue that is already hitting a number of professionals in the construction industry. It is concerned about the confusion over the definition of the accountable person and the building safety manager roles, and how that impacts on their ability to obtain professional indemnity insurance. It wants more detail so that there is no “potential for confusion”. The ABI is also concerned about the

“legal position where there may be multiple APs responsible for a building”,

and it is seeking

“a better understanding of the liabilities that flow” from the issues of underwriting PI insurance, and particularly how those liabilities are split between the two roles.

The ABI goes on to say that

“the current market conditions make it a sub-optimal time”

—I love the term “sub-optimal”; it basically means “a rubbish time”—

“to be launching any kind of new regulatory framework requiring mandatory PI cover.”

Of course, we all want everyone involved to have adequate insurance cover in some form or another.

Photo of Brendan Clarke-Smith Brendan Clarke-Smith Conservative, Bassetlaw

I appreciate a lot of the hon. Member’s points and I share concerns about the very difficult situation. Does she agree, however, that if the legislation is too prescriptive, we could end up restricting the industry and as a result make it more difficult for it to adjust to what are actually asking it to do?

Photo of Ruth Cadbury Ruth Cadbury Shadow Minister (Housing, Communities and Local Government) (Planning)

The hon. Member makes a good point. The problem with insurance is that it can dominate discussions about public policy because issues arise that are not covered by the original legislation and regulations. If something does not go ahead—we have seen tabloid headlines like, “Council stops children going on a school trip”—it is often not because it has been proscribed but because of the insurers. It has nothing to do with the council. We must understand the crucial relationship between the private sector and the insurance sector. The Government must be careful that any legislation on safety, such as this Bill, does not have unintended consequences.

In conclusion, the ABI wrote in its submission that

“there is no ‘silver bullet’ solution to the problem of the cost of insurance for un-remediated high-rise residential buildings…However, market-led intervention by itself will not ‘solve’ the problem—there is likely to be a need for the Government to intervene to provide support for the relatively small number of buildings that are simply too risky for the market to insure at prices that are affordable to the majority of leaseholders.”

Is that something that the Government are considering? The last thing we want is to go from the current situation of having many unsafe new homes, to one where we have no new homes.

Photo of Christopher Pincher Christopher Pincher Minister of State (Department for Levelling Up, Housing and Communities) 2:30 pm, 23rd September 2021

I am obliged to the Committee for its consideration of the clause. Before addressing the points that have been raised, let me reiterate that we believe that the reforms in the Bill, and particularly in this clause, by creating a requirement to publish guidelines in the future and providing the Government with the power to secure the involvement of specialist bodies in assessing what the insurance guidelines and approved schemes should be, provide clarity to assurers and the insurance market. I can assure the Committee that my noble Friend Lord Greenhalgh has held a series of discussions with the insurance sector over the last year. Indeed, today he began a series of much more detailed bilateral discussions with the sector to make sure that the insurance provision is appropriate and available.

Before I address the points made by the hon. Member for Brentford and Isleworth, let me address one of the points made by my hon. Friend the Member for West Bromwich West about secondary legislation in the context of this clause. Although I understand the points that Members across the House, and not just in this Committee, express about secondary legislation, we must remember that if there is to be further Government legislation in the financial affairs space—in risk assurance or lending, for example—that could have a consequential effect on the regulations that apply to the insurance market with respect to building safety if we write those regulations into the Bill. Because of changes and other legislation that may come from other Departments, it is much safer for us to put our consequential arrangements in secondary legislation, which allows the Government the flexibility to respond more quickly and allows the House to scrutinise those changes.

I turn to the compelling contribution by the hon. Member for Brentford and Isleworth. I recognise that she raised some questions about the relative roles and responsibilities of the accountable person versus the responsible person, and the way in which the Regulatory Reform (Fire Safety) Order 2005, the Fire Safety Act 2021 and this Bill, when it becomes an Act, will operate. We will certainly ensure, though guidance, that those understandings are clear. That is one of the reasons why, for example, we have specified that where there are potentially multiple accountable persons, there will be a principal accountable person. That should, I hope, give the insurance sector and other players in the market some clear direction and guidance as to who is responsible for what, and their relative responsibilities.

The hon. Lady also mentioned the difficulties with risk assessors, for example, getting assurance and insurance. We recognise that. One might say that the insurance sector has been rather sclerotic, but that is one of the reasons why we have worked closely with it, and one of the reasons why my right hon. Friend Robert Jenrick made it clear when he was Secretary of State that we will provide for public indemnity insurance for EWS1 a Government-backed backstop where the market is not able to provide insurance for those inspectors that require it.

We have tried to ensure that we have sufficient flexibility in the clause to respond to the changing terrain of the insurance market and of building safety, and that we have provided, through other means, adequate resources and adequate assurances to the market that the Government are there to help where necessary. Having said that, I commend the clause to the Committee.

Question put and agreed to.

Clause 47 accordingly ordered to stand part of the Bill.