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Insurance Brokers (Registration) Bill

Volume 930: debated on Friday 29 April 1977

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Order read for resuming adjourned debate on amendment proposed [ 22nd April], on consideration of the Bill, as amended ( in the Standing Committee).

Which amendment was: No. 83, in Schedule, page 21, line 7, leave out from beginning to "shall" in line 8 and insert

"Five persons nominated by the Secretary of State of whom one shall be a barrister, advocate or solicitor and another."—[Mr. Clinton Davis.]

Question again proposed, That the amendment be made.

11.30 a.m.

On a point of order, Mr. Deputy Speaker. I want to make clear that the principal sponsor of the Bill is at present somewhere between here and Strasbourg and has asked me to act in his stead during his absence.

I remind the House that with this amendment we are discussing the following amendments: No. 84, in page 21, line 8 at end insert

'and another two who shall represent the interests of consumers'.
No. 85, in page 21 leave out line 9.

11.30 a.m.

When the House concluded its deliberations on Friday, after five hours' debate, I was in the middle of my remarks on this group of amendments. The House will recall that in moving Amendment No. 3 the Under-Secretary of State disposed of the President of the Law Society in 15 seconds flat. As a lawyer himself, I hope that that will not damage his prospects of a speedy and full return to the Bar, which I trust will take place in the not-too-distant future.

Despite the Under-Secretary of State's brevity, it is not my intention to compensate for that by speaking at considerable length. The House, and especially those hon. Members who have interests in sub- sequent business, might find it helpful to know that my intention is to be relatively brief. I shall restrict my remarks to this group of amendments.

I am sure that the sponsors of the Bill could not have believed that they would have the good luck to return to this business the following Friday and that they would have a clear run. I am sure that they did not believe that if we ran out of time, there would be time the following Friday without asking the Government to find time, although I am sure that that time would have been available had the need arisen. One could argue whether that is good luck or the luck of the Devil.

There would be a disagreement about whether we are discussing this matter because the sun is shining on the righteous or because of the luck of the Devil. I prefer the latter reason. It is up to the Law Society to resolve the matter and to make its own reservations. I do not feel particularly strongly on that question.

I shall confine my remarks to the amendment tabled by the hon. Member for Peterborough (Mr. Ward). My remarks are directed to the proposition that the consumer bodies should be involved in the way he proposes. The hon. Member proposes that there should be consumer representatives on the Insurance Brokers Registration Council. That is a fundamental aspect of the Bill.

The Minister's proposition is that the Bill is in some way beneficial to consumers. He believes that this is an important step for consumer protection. If it is not, the public should be so informed.

The hon. Member for Peterborough has been misled by the debate that we have had. The public have also been misled. The hon. Member and the public should clearly understand that this substantial Bill, with all its legal complexities, its massive new bureaucratic machinery and all the costs upon the insurance broker, is not intended to stop bad salesmen selling bad products by bad methods. The Bill imposes other constraints upon them, but it does not stop bad practice.

I hope that the public understand that. If there are people whose activities or sales techniques are adverse to the consumer, who practice bad ways of selling insurance or who mislead the public, the Bill does not propose that they should be prevented. I hope that that is understood by the public and the Press. All that the Bill provides is that in future such people should call themselves something else. They can carry on with the same practice but under a different name. I see that the Minister shakes his head.

The hon. Member is characteristically so partisan on this matter that he cannot present his case in a factual manner. Is he not aware that there is to be a code of conduct? Is he not aware that disciplinary provisions are incorporated in the Bill? Is he not aware that this new organisation will be set up to ensure that its position vis-à-vis the consumer is enhanced by proper practice? Why does the hon. Member leave out that vital aspect of the Bill?

I can only assume that the Under-Secretary of State was not listening, or that even at this stage he has not begun to understand the Bill. There is no suggestion that people who engage in bad practice should be prevented by the Bill from continuing that bad practice. The Bill provides that in future they must call themselves something different. In future a person who currently calls himself an insurance broker will have to change his title to something else, such as "agent", "consultant", or "underwriter." I hope that the Under-Secretary does not quarrel with that.

The converse of the argument that the hon. Member has put to the Minister is that if the Bill becomes law and a person calls himself an insurance broker, the public can expect that he will not practice the low standards to which the hon. Member referred.

The hon. Member has not established that the use of the term "insurance broker" is an element in persuading the consumer to buy insurance. He has not established that the title of "broker" has such status that the individual is persuaded by it to buy insurance.

In practice people who engage in such bad practice are not likely to be prevented by this legislation. Claims of bad practice are exaggerated. Not many examples have been quoted during these proceedings. Many such people do not call themselves insurance brokers even today. Many of the techniques that caused problems in the past were used by people who called themselves something else. The term "consultant" often has greater status than "broker". I hope that the House grasps that argument.

The Bill is not designed to stop bad insurance brokers. It is designed to prevent bad practitioners calling themselves insurance brokers. It is not designed to prevent a salesman selling insurance in the same old way. The Bill proposes that in future that person must operate under a different name.

I concede that there could be a considerable element of consumer benefit in the Bill in the sense that it would extend the area of professional indemnity insurance to a larger number of brokers than at present. That in itself is slightly misleading. Some of the remarks by certain of my hon. Friends would lead one to believe that a professional negligence policy is almost akin to a compensation fund.

The Bill would protect the broker against allegations of professional negligence. For the consumer to benefit he must go through the legal processes to prove his case. Arguments about negligence would not be relevant to the type of consumer complaints which are often based on grievances by the public against brokers.

A poll published this morning made clear that public satisfaction with insurance companies and insurance brokers is almost top of the list of the services provided by commercial and professional concerns. I regret to say that public estimation of the service provided by Parliament was at the bottom of the list. Perhaps that casts some doubt on the validity of the findings.

Would the hon. Gentleman say whether the poll was taken before or shortly after his contributions last week?

That can be interpreted in a number of ways. Whether it reflects on insurance brokers or Members of Parliament I do not know. Those of us who are both can, perhaps, find satisfaction in any reading of the poll.

At this stage the Bill has a doubtful claim in respect of the position of consumer representatives. I believe that this is a Bill designed to enhance the status of certain insurance brokers rather than to help the consumer.

It may be that if the Bill were extended, or some of the desires of the Under-Secretary were carried through, the consumer would have a stronger case. We know that the Minister does not want things to stop here. He said on Second Reading that the Government were not ready to go further along this road but that we were not at the end of the road. He has said in the White Paper that he wants to extend the principle of control so that in future the right to sell insurance shall be restricted to insurance companies, their employees, registered insurance brokers, accredited agents and those who are advertising themselves as primarily sole agents for one company. Once we move to that restriction, I am sure that there will be widespread opposition throughout the country from those hundreds and thousands of people who have agencies of one sort or another and who play a major part in providing an insurance service to the consumer.

If we move to that stage, and this is what the brokers' institutions have paved the way for, there would be a much stronger case for consumer representation on the Insurance Brokers Registration Council. I do not believe that the Bill will be of benefit to the consumer. Nor do I think that it is particularly designed to be of benefit to him. It paves the way for much more restrictive legislation. This has been invited by the brokers preparing proposals and responding to the threats made by the Government to impose legislation if this Bill was not brought forward on a voluntary basis.

If the Bill is designed to put two consumer representatives on the registration council, I suggest that one of them should be a medical practitioner or a psychiatrist. We need someone who can deal with this dreadful disease that I call "regulitis". This is recognised as a desire to regulate everybody and everything, individuals or businesses. It saddens me that it is a disease to which Members of Parliament are particularly susceptible and that it should have spread to what was once one of the havens of free enterprise and competition, namely, the insurance-broking world.

Bearing in mind the length of time we have already debated this issue, I shall conclude my remarks now and hope that another place will take a more robust view of such legislation.

I support the general principle of the Bill and hope very much that it will pass into law. I congratulate—through the hon. Member for Brentwood and Ongar (Mr. McCrindle)—the hon. Member for Harrow, West (Mr. Page) on introducing the Bill. All the consumer organisations that have examined the Bill support it and wish to see it become law. The Consumers Association certainly supports the Bill.

There has been little research into the consumer aspect of the insurance world. I accept that it is probably true, as the hon. Member for Faversham (Mr. Moate) has said, that there is little public complaint about the quality of service provided by the insurance industry generally. It is true that the Consumers Association does not receive many complaints.

11.45 a.m.

The association carried out an investigation two years ago using a sample of about 500 out of its membership of around 750,000 and discovered that there was evidence of malpractice in that there had been high pressure selling aimed at persuading people to purchase policies which they did not want and which did not meet their needs. That is undoubtedly something which will have to be dealt with in a more comprehensive measure than this one.

As the Under-Secretary has said, this is a much narrower measure than the hon. Member for Faversham was suggesting. The Bill is a step towards consumer protection. The Under-Secretary said on Second Reading:
"our first reason for supporting today's Bill is that it is another step towards our goal of setting up comprehensive protection for the consumer, and in particular the insurance consumer".
For that reason one would think that the consumer interest would be firmly tied into the Bill. I am sorry to have to say that, having studied the debates in Committee on the schedule and on this aspect, there is a large gap which I hope the Government will see fit to fill in the way I propose in my Amendment No. 84.

The consumer interest is not specified anywhere in the Bill. The proposed Insurance Brokers Registration Council is composed largely of professionals. On Second Reading I asked my hon. Friend about the relationship between insurance brokers and the companies with which they will deal. This point was taken up later in the debate when the hon. Member for Orpington (Mr. Stanbrook) said:
"It must be a very difficult professional task for insurance brokers to give objective advice about the relative merits of different policies independently and ignoring the financial benefit which they themselves may derive from any individual policy."—[Official Report, 28th January 1977; Vol. 924, c. 1908–29.]
My hon. Friend said, as he said this morning, that it would fall for matters of that kind to be dealt with in the code of conduct which would be drawn up by the proposed council under Clause 10. I am sure that that will be generally supported.

We must have a consumer interest at this stage. If there is to be a code of conduct, there must be a consumer hand involved. It was the hon. Member for Brentwood and Ongar who said on Second Reading that the rule of caveat emptor, which many people have talked about, did not apply in this area. He said we had to think instead of iuberrima fides, which has a bearing on trust. In that situation the case for consumer representatives being involved in drawing up the code is much stronger.

If the House agrees to my hon. Friend's amendment we shall have
"a barrister, advocate or solicitor"
among the membership of the council and an accountant. That will leave three places to be filled. I have a great deal of faith that my hon. Friend and his colleagues will do their utmost to see that consumer interests are represented. However, we are dealing with the law and I do not believe that the Bill gives sufficient confidence to consumers generally.

We have to remember that future Ministers might not appoint the right sort of people. If the best hopes of the hon. Member for Faversham and the worst fears of the Labour Party are realised, it might be that future Ministers would appoint retired admirals or retired civil servants—worthy people but people who do not have the special consumer expertise which is needed in this complicated area.

I remind the Minister that provision has been made in a number of other measures of this kind. I remind him of the terms of a Policyholders Protection Act which, in Schedule 1, says that the Policyholders Protection Board must have at least one person who appears to the Secretary of State to be qualified to represent the interests of policyholders.

Again, in the Fair Trading Act 1973 the Secretary of State is required to appoint people with specified interests to the Consumer Protection Advisory Committee. He must include, for example, persons qualified
"by virtue of their knowledge of or experience in organisations established, or activities carried on, for the protection of consumers."
I ask the Minister to undertake that he will accept my proposition that provision should be made for consumers. I am sure that he meant what he said on Second Reading. The Bill is mainly a consumer protection measure, and I hope that he will accept this proposal so that I do not have to ask the House to divide.

I start, as I have done on most occasions in connection with the Bill, by declaring my interest as the parliamentary consultant to the British Insurance Brokers Association. On Second Reading I suggested that the twin pillars on which this measure should rest were on the one hand professionalism and on the other consumer protection.

As we are discussing a seriess of amendments which, in shorthand, could be described as dealing with consumer protection. I think it an appropriate occasion for me to say, as we come to what I hope is the end of our deliberations, that my conviction that this is largely a consumer protection measure is as strong now as it was when I mentioned it on Second Reading. But the very words "consumer protection" tend to lead one to ask "Consumer protection against what?"

Some critics of the Bill would lead us to believe that there are no practices carried out by insurance brokers against which the consumer needs to be protected. As one who is a consumer but who has also spent most of his life closely connected with the insurance world, and particularly the insurance broking world, I do not think that this is necessarily so. The consumer has to be protected against assuming that an expertise is possessed by someone who at the moment is perfectly free to be an insurance broker, when it might turn out to be an expertise that that person does not possess.

If we had never had a series of experiences such as the Vehicle and General debacle and the Nation Life difficulties, in both of which brokers were intimately connected, we might find it easier to protest that there was nothing to protect consumers against. But, to coin a phrase, we have to accept that 1977 and all that has changed the basis on which the consumer approaches his insurance broker. I believe that that change has been occasioned by a number of harsh experiences, which it will be the purpose of the Bill to correct.

While no one wishes to be complacent—it would be totally wrong to be complacent about insurance sales methods—would not my hon. Friend agree, thinking back to Nation Life and Vehicle and General, that it is most likely that the principal agents, the brokers, would have been quite properly registered under this Bill if it had been in force and, therefore, the Bill would have no bearing on the situation if we were to have a recurrence of the collapse of companies of that order, which I trust we shall not?

I was following up the point about how effective the Bill is in regard to protection. If it becomes more difficult for a person or a company to call itself an insurance broker, it effectively means that standards will rise. If standards rise, surely among the areas in which the public can expect growing competence is in the knowledge of what is going on in the affairs of a particular insurance company.

If it is offering to the public a return on money which self-evidently would be difficult to achieve, it is the responsibility of brokers to point that out to the public and to restrain themselves from selling the product of that company to the public. Until now, there has been no encouragement to do that. Because some of those companies have offered higher commission than most there has been every encouragement not to do it. If, however, the renewal of a brokers registration is dependent on the professionalism that he shows and the understanding of consumer protection that he evinces, in my judgment my hon. Friend the Member for Faversham (Mr. Moate) is not strictly correct in saying that these matters do not come within the ambit of the Bill. I concede that they are on the fringes of the Bill as distinct from being within the provisions of the Bill, but they should not be ignored.

The Bill will require brokers to provide service of a certain standard. That goes to the very heart of consumer protection. The Bill will require professional indemnity cover in the case of error. While my hon. Friend the Member for Faversham is strictly correct in saying that that is of greater application to the broker than to the consumer, I am sure he would concede that in an indirect fashion it is of interest to the consumer to know that such cover exists. Ultimately, when the Bill is fully operational, it will require educational standards to be provided for insurance brokers, which will or should give the public added reassurance that when dealing with a person who is called an insurance broker they are dealing with a person who is professionally qualified.

I shall repeat another remark that I made which is apposite to the amendment. Whereas insurance broking at the moment can reasonably be described as a trade, part of the aim of the Bill is to turn it into a profession with professional standards. If that is not in the interests of consumer protection, I do not know what is.

I turn now to Amendment No. 84, in the name of the hon. Member for Peterborough (Mr. Ward). I have some sympathy with the general outline of his remarks but I question whether it is strictly necessary to have a specified consumer representative on the council. I confess that I find difficulty in knowing how one can pinpoint someone who is an adequate representative of the public interest or the consumer's interest in this respect.

I remind the hon. Gentleman that the Secretary of State is given freedom to appoint a certain number of members to the council. I hope he was being mildly churlish in assuming that any Secretary of State would do other than appoint to the council as his representatives people whom he thought represented the public interest. That is the purpose of giving the Secretary of State freedom to make such appointments. I should be surprised if we needed another appointment of someone specifically to represent the consumer's interest, at least until we have decided what the consumer's interest is.

Does not the hon. Gentleman agree that there are specialists in this field who have made a great contribution, particularly on fair trading and other matters, and who have more to offer in consumer expertise than ordinary members of the public?

I imagine that the hon. Gentleman is referring to bodies such as the Consumers' Association. I pay tribute to the work of such bodies in many areas, but they cover such a wide spectrum that they are not necessarily the best bodies to represent the consumer in regard to the services provided by an insurance broker. It is no criticism of consumer societies or bodies, but, having conceded the right to the Secretary of State to make these appointments, we should be well advised not to approve the hon. Gentleman's amendment but to react sympathetically to what is behind it and leave to the Secretary of State the choice of the representation that he would wish in order to protect consumers.

12 noon.

The consumer in the past has complained most about the services of an insurance broker in two areas where he has felt least protected. First, he feels that he has sometimes been directed to motor insurance companies which have not always lasted the period of the policy. Second, he has felt that he has been led to believe that the effecting of a life insurance policy will lead to the obtaining of a mortgage which does not materialise.

Here I come to the point raised by my hon. Friend the Member for Faversham. In no direct sense would either of those practices be prevented by the operation of the Bill. He is wrong, however, to assume that the Bill can be seen in isolation. I believe that what insurance brokers do and are allowed to do flows to a great extent from another piece of legislation with which my hon. Friend and I were intimately connected a few years ago, namely, the Insurance Companies Act 1974.

One provision of that Act is currently topical. It explains my point. It is the so-called cooling-off period, an order in respect of which is likely to emanate from the Department of Trade in the very near future. That is an element of consumer protection. If that is related to the consumer protection which, I contend, is written into the limited freedom to describe oneself as an insurance broker, I believe that the consumer will be better protected after the Bill is in operation, but not solely because of the Bill.

I recall saying that the Bill was aimed at lifting the standards of the insurance broking world, and I believe that that is the greatest consumer protection we can offer. My hon. Friend contends that only if a person calls himself a broker is there any element of consumer protection. But he fails to grasp the fact that until now anybody has been able to set up as an insurance broker—

My hon. Friend may say that, and I am as much in favour of private enterprise as he is, but it is unrealistic of him to believe that the unfettered private enterprise to which he subscribes is acceptable in 1977. I sometimes think that my hon. Friend is like Rip Van Winkle. He fell asleep 100 years ago and has now awakened assuming that conditions today are the same as they were then. Self-evidently that is not so.

We must accept that those of us who believe in free enterprise are faced with two decisions. Either we must accept some degree of self-regulation by the brokers, or we must accept direct control imposed by the Government. My hon. Friend cannot have unfettered free enterprise following all that has happened to the consumer in the last 10 years. If he cannot have that, he must choose between two other courses of action. If he prefers complete Government control, I wish that he had said so in the first speech he made on the Bill. If, however, as I suspect, he does not want that, he must follow the middle course.

When my hon. Friend says that the Bill is only the beginning of legislation in this field, he may be right. In all sincerity I ask him what is so terribly wrong with that. Under the Bill, the title "insurance broker" is to be uplifted and accompanied, I suspect, by a massive campaign to educate the public into what an insurance broker will be from this day forward. Is there any reason, therefore, why the trouble and expense to which an insurance broker will have to go should not be set against the continuing freedom of people to call themselves agents when they are really petrol-pump attendants masquerading as experts in life assurance?

One cannot overlook the responsibility that the insurance companies will have immediately after the passage of the Bill. So far from contradicting my hon. Friend when he says that this is just the beginning, I agree with him. If insurance brokers are to be regulated, it is not too great a step, in the interests of the public and the people concerned, then to regulate the insurance agents.

My hon. Friend has been most frank in saying that this is the beginning and not the end of the road, and that is an interesting point. He says that if the Bill had not been introduced the Government would have imposed their own regulations. Does he believe that because a Labour Minister makes a threat one should seek to compromise with it? The Labour Party has promised nationalisation of the insurance companies. Does my hon. Friend think we should go halfway to meet it on that?

My hon. Friend should know me better than that. We have crossed swords on insurance matters many times, and I make no secret of the fact that I take a different viewpoint from his. I tell him straight, however, that it may be that the type of Conservative Government that he envisages would in no circumstances intervene to regulate a business or profession. But I think that I am more likely to get the sort of Conservative Government that I envisage, a Government who recognise the pressures of consumer protection and take steps not totally dissimilar from those we are now discussing and which the present Government and the Conservative Front Bench support.

Once again my hon. Friend is chasing a will-o'-the-wisp. If only we can get him to understand that the Bill is a good compromise in the interests of the insurance broking world, to which I know he is dedicated, and also in the interests of the consumer, we shall be making progress.

Consumer protection is, of course, important, but I do not believe that the way in which the hon. Member for Peterborough suggests we should act is the only way. I therefore suggest that he would be well advised, on the assurance from the insurance broking world that we recognise the need for consumer involvement and consumer protection, not to press his amendment and to accept that the way we are planning to do it is at least as good as the way he wishes.

This has been an interesting short debate. We have had in particular an interesting philosophical duologue between the hon. Members for Faversham (Mr. Moate) and Brentwood and Ongar (Mr. McCrindle). I feel something of an interloper, and I have no interest in sorting out the problems of the Conservative Party in its approach to this matter or any other. It certainly has enough problems in that regard.

The hon. Member for Faversham, save perhaps for his views on the EEC, dwells in the nineteenth century on consumer protection, and I think that that is to put it modestly. If I recall correctly, he opposed the Policyholders' Protection Bill. He takes the view that the Bill before us is not a measure of consumer protection. I see no evidence that he believes that there is any need for consumer protection in this regard. I am sure that if he went back to the days when this House was discussing whether solicitors should be professionally qualified he would have been against that proposal too. No doubt he would have taken the same line about accountants and doctors. That portrays a most extraordinary attitude about consumer protection at a time when I believe that the overwhelming majority of people, not only in this country but elsewhere, are rightly demanding higher standards.

(Hackney, North and Stoke Newington): Is not my hon. Friend saying that this was essentially a Bill for consumer protection?

That is exactly what I was saying. My hon. and learned Friend intervenes just as I was about to go on to say, as I think did the hon. Member for Brentwood and Ongar, that the questions of consumer protection and enhanced professional standards are integrally connected. That is my case with regard to this matter. I believe it to be a fair case.

I was a little perturbed by something that the hon. Member for Brentwood and Ongar said. I agree with him, but it was the way in which he said it. That was that what we were seeking to do eventually was to turn the organisation of brokers from a trade into a profession. I am concerned about the words that the hon. Gentleman has used only because, in a sense, they reflect on my position. I have moved from a profession into trade. The hon. Member for Faversham is anxious that I should resume my original occupation as rapidly as possible. I understand his wishes but I think that he will be disappointed.

If the hon. Gentleman is a little unduly concerned that my brevity in introducing this amendment last week has severely strained the relations between myself and the President of the Law Society, I can put his mind at rest. The president is a very good friend of mine and has not complained about the brevity of my remarks. I am very surprised that any hon. Member, knowing me, complains about that particular matter. It is the first time.

The hon. Member for Faversham has asserted time and time again that he does not believe that this measure promotes consumer protection one whit. He has tied that argument to the particular amendments that we are now debating. As I have already said, I endorse the argument put forward by the hon. Member for Brentwood and Ongar when he said that the Bill provides the twin pillars of enhancing the standards of professionalism amongst those engaged in prac- tising this business and consumer protection.

The hon. Member for Faversham went on to say that a huge bureaucracy would be created by virtue of the organisation that was to be set up under these proposals.

The hon. Gentleman did say "huge". It can be checked. I do not know whether he now wishes to clarify that. But there is no evidence of that. That is not unusual when one deals with the hon. Gentleman's arguments, because many of them are based on assertions which are not necessarily the naked truth.

Would not the Minister concede that, if one of the alternatives that I put to my hon. Friend—namely, that there should be full-scale Government regulations—was the order of the day, that would indeed create a vast bureaucracy of the sort that my hon. Friend fears?

How vast the bureaurcracy would be I do not know, but it was obviously one of the possibilities that has to be considered. I do not regard it as having been a possibility that was poised like a knife at the throat of the brokers. It was a possibility which had to be considered simply because it was necessary to have a measure of consumer protection. That was my belief and it was evidently the belief of the brokers. I have always opted for a voluntary scheme because I prefer that to the engagement of the Government, or local government, in an organisation designed to offer surveillance over the profession. I believe that if this had not come about then gradually there would have been an increasing demand for some other form of surveillance. But that, too, would have been resented by the hon. Member for Faversham.

12.15 p.m.

What it comes down to is that somehow or other this involves some mystical form of protection for the consumer. I believe that the hon. Gentleman is hopelessly misled about that. I understand that he himself is an expert in brokerage. Although I have criticised the hon. Gentleman and he has criticised me, on many occasions during the course of this debate, I have a reasonably close relationship with him and I admire his stand on many points. I am sure that he attains very high standards. But that is not the case with everyone. We want to ensure, and we are right to insist on it, that there is a means of promoting higher standards for the protection of the consumer.

While the Minister is welcome to carry his own description of my arguments ad absurdum—I do not suppose people will take much notice—may I ask him not to advance points of view that I have not put forward? Some matters such as disclosure, the relationship between brokers and the cooling-off period of life insurance are wholly welcome. What I have argued all along is not about the need for consumer protection. I have simply said that the Bill as proposed does not offer consumer protection.

I apologise if I have done the hon. Gentleman any injustice with regard to his arguments. On reffection, he might agree that he has not altogether been the epitome of clarity when presenting some of those arguments. But I take issue on this fundamental point. The whole Bill, through its measures, is designed to deal with those coming into the profession in future, those who will become registered. It also deals with the establishment of educational institutions and qualifications relating to that, the rules regarding the register, the regulation of conduct, discipline, the keeping of accounts, the compensation fund and professional indemnity., It is not simply designed as a sort of ruse through some subversive technique to increase a monopoly position for the brokers. It is specifically designed to enhance the protection that can be afforded to the consumer by reason of having better standards in this profession.

I do not for a moment presented to have the expertise of the hon. Member for Faversham (Mr. Moate), but my hon. Friend will surely recall that during the Second Reading debate the point was made again and again that there would be the greatest possible consultation with all the authorities and individuals with regard to this matter. What I feel, and what I desire to place on record, is that while I agree with the object of the Bill I do not believe that that consultation has taken place. Every interest has not really been gone into. For example, I recall speeches made from the Opposition Benches about how necessary it was that there should be this degree of consultation. I would place on record that my objection to the Bill is that sufficient time and study has not been given to the matter.

My hon. and learned Friend now invites me—I suppose it is germane to this matter because we are talking about the protection of the consumer—to disclose to the House what ordinarily would have been more appropriate to disclose on Third Reading. My hon. and learned Friend is quite wrong when he asserts that there has been no consultation. I shall come back to that point presently, because I think it is something upon which I ought specifically to comment. The reason why we have these better standards is that greater confidence on the part of the consumer can be reposed in those operating as insurance brokers and registered as such.

My hon. Friend the Member for Peterborough (Mr. Ward) has raised a very important issue. I have a great deal of sympathy with his argument. He proposes that two people should represent the interests of consumers. I should be unhappy to specify that two of the Secretary of State's nominations should be earmarked for consumer interests. There are to be only five places at my right hon. Friend's disposal, two of which are reserved for a lawyer and an accountant. In making the other three nominations my right hon. Friend will have to take account of the claims of a number of different interests and organisations.

I understand perfectly well the strength of my hon. Friend's case for nominating a consumer representative for one place on the council. I am sure he recognises that difficulties would be caused by writing rigid requirements of that sort into the Bill. Certainly I could not accept his proposal that two people should represent the interests of consumers, but I shall reflect on the possibility of incorporating one consumer representative. I am not the promoter of the Bill, but I think it right that we should reflect on the matter. We shall have an opportunity elsewhere to deal with it. My hon. Friend has advanced a formidable case to which we should give proper attention.

I should have liked to hear more about the organisations which my hon. Friend has in mind as possible candidates for the other three places on the council, because some of them might have a consumer ambience. However, in view of what my hon. Friend has said and his intention, using his best endeavours, to meet my point, I should be prepared to ask leave to withdraw my amendment.

There would be no need for the hon. Gentleman to withdraw his amendment. It has not been moved.

An example of the interests we must consider is the non-BIBA brokers. We must also consider the interests of the insurance business as a whole. Therefore, the Secretary of State is clearly tied in. However, I do not exclude the possibility of having a consumer representative on the council. In that event, we should have to identify who he or she should be.

My hon. Friend the Member for Peterborough, in support of his argument, cited various other Acts. He referred to the Fair Trading Act, with which I am not very familiar, but I think that in that instance he was citing a permissive rather than a mandatory power. I do not know whether he would be satisfied with such a power in this case. We shall discuss the matter not only with the promoters of the Bill but with my hon. Friend.

The hon. Member for Faversham said that the Bill would not have mattered if it had been set in place at the time of Nation Life and Vehicle and General by ensuring that good salesmanship technique would have been applied. He went on to say—I hope I am not misquoting him on this occasion—that many people who at that time were offering advice would undoubtedly have been recognised as registered insurance brokers. That is true. No profession, however stringent its disciplinary sanctions, can guarantee that its members will offer good advice. What it will do is to ensure that its membership has been properly trained and that people have passed the examinations which qualify them for membership. It will ensure that in the event of misbehaviour the miscreant is disciplined. It will ensure that there is proper provision for a compensation fund. All those things are underwritten in the Bill. That is why the hon. Gentleman has taken the issue of advice out of context.

Of course, one could not give the guarantees to which the hon. Member for Faversham alluded. That would be quite impossible. But, set against the situation as it would be compared with what it is, it is bound to be a substantial improvement.

Neither the Under-Secretary nor I would wish to draw wrong inferences about people acting as brokers in a Nation Life situation. My point essentially is that many of the brokers most successful in selling Nation Life policies were Lloyd's brokers. No one suggests that they were engaging in activities or salesmanship techniques which were unfortunate or wrong. The Nation Life situation could recur, although I hope that it will not and perhaps other regulations will prevent it, but it does not mean that no extra protection will be given by a Bill of this kind.

We are not talking about a direct extra protection. It is a question of the background against which protection for the consumer generally is effected.

I wish to say a word or two about the amendment, which we have rather forgotten. It relates to the replacement of the President of the Law Society's nominees to the council by a nominee of the Secretary of State chosen from the legal profession. I acknowledged in Committee that the provision in the schedule for one member of the council to be nominated by the President of the Law Society contained the undesirable presumption that the representative of the legal profession on the council would always be an English lawyer. My amendments overcome this danger. Scots lawyers would have exactly the same opportunity as other lawyers of nomination by the Secretary of State, and Scots representation generally on the council is safeguarded by the provisions in paragraph 2 of the schedule pointing to the desirability of the broker members of the council being representative of all parts of the United Kingdom.

I turn to the serious question about consultation posed by my hon. and learned Friend the Member for Hackney, North and Stoke Newington (Mr. Weitzman). As he said, I emphasised on Second Reading the need for consultation. I said that we would consider very carefully the comments on the registration of insurance brokers that we received following publication earlier in January of the consultative paper issued by the Government entitled "Insurance Intermediaries." We called for comments by the end of March, and I am glad to say that a large number of organisations and individuals have taken advantage of our invitation to let us know their views.

The comments fall into three categories. First, we received many comments on the question of the control of insurance agents, but they are not relevant to the regulation of insurance brokers. We shall analyse the comments and take full account of the points put to us before we make detailed proposals.

Secondly, we received comments relevant to the rules to be made under the Bill. We also received a number of comments on the question of the regulation of insurance brokers which will have to be taken into account when we consider the detailed rules to be made by the council but which are not relevant to the Bill.

Order. May I, with all due respect, point out to the Minister that he is going a little wide of the amendments, which relate to the question of the council?

12.30 p.m.

Then I seek your guidance, Mr. Deputy Speaker. This matter was specifically raised by my hon. and learned Friend the Member for Hackney, North and Stoke Newington. It is germane to the whole question of consumer protection which arises on the amendment. The debate has ranged fairly widely on the issue. I suggest that it would be unfortunate if I were not able to inform the House of the comments that have been made and which are absolutely essential to understand the issue in a wide-ranging debate of this nature.

Further to that point of order, Mr. Deputy Speaker. I intervened specifically on this point as it affected the question of consumer interests. I therefore suggest that it is clearly in order on the amendment.

I suggest that it is, Mr. Deputy Speaker.

I was saying that the comments on the subject of the regulation of insurance brokers relate essentially to the question of the code of conduct and will certainly he taken into acount when we consider the detailed rules, made by the council. We heard from people who are concerned about, for example, the possible cost of registration, about the amount of working capital which will be required of registered brokers and about the level of professional indemnity insurance that will be called for.

The Bill lays down no specific requirements in those respects. It provides simply for the council to make rules after it has been established. These rules will, of course, be subject to the approval of my right hon. Friend the Secretary of State. I give the undertaking to the House that before my right hon. Friend gives his approval we shall want to satisfy ourselves that the council has taken proper account of the comments that have been made and particularly of the interests of the small man in carrying on his business without the imposition of unreasonable burdens and of the impact that is to be made on the consumer generally.

Thirdly, we have received comments concerning the provisions of the Bill itself. We have felt unable to accept some of them. For example, it had been proposed that there should be separate registration for different classes of insurance business, particularly for life business. However, we have taken the view that this would be difficult to accommodate in the structure of the present Bill and could well be confusing for the public.

We have already, in the amendments we have proposed in Committee and today, taken account of other comments. Those amendments have been substantial, as I think my hon. and learned Friend the Member for Hackney, North and Stoke Newington will acknowledge. We have, for example, revised provisions relating to finance and accounts which we had tabled previously. This owes much to comments made by the accountancy bodies, the British Insurance Association and the Life Offices Association as well as by members of the public. Likewise, the extensive changes made in Committee to Clause 3, widening the gateways to registration as brokers, take account of public comments.

Then there was the general comment on broker registration. I was particularly gratified to find that very few of those who wrote to us expressed complete opposition to the registration of brokers. There was a large majority for the principle of the Bill.

Therefore I thank my hon. and learned Friend, even though we were both apparently gravely in danger of offending the rules of the House, which we had no intention of doing, but I think it is necessary to view the consumer interest agaist the backcloth of what has happened since the Bill was introduced. Substantial and necessary changes have been made to enhance the interest which, I know, are close to my hon. and learned Friend's heart.

I therefore hope that the amendment will be accepted.

Amendment agreed to.

Amendments made:

No. 85, in page 21, leave out line 9.

No. 86, in page 21, line 10, leave out from beginning to 'to' in line 11 and insert—

'2.—(1) The persons chosen to represent registered insurance brokers in the first instance shall be nominated by the British Insurance Brokers' Association
(2) The persons chosen to represent registered insurance brokers after the retirement of those nominated under sub-paragraph (1) above shall be elected by registered insurance brokers in accordance with a scheme which—
  • (a) shall he made by the Council;
  • (b) shall not come into operation until approved by order of the Secretary of State; and
  • (c) may be varied or revoked by a subsequent scheme so made and so approved.
  • (3) The Secretary of State may approve a scheme either as submitted to him or subject to such modifications as he thinks fit; but where the Secretary of State proposes to approve a scheme subject to modifications he shall notify the modifications to the Council and consider any observations of the Council thereon.
    (4) The Council shall submit a scheme to the Secretary of State for approval before the expiration of a period of two years beginning with the day appointed for the coming into operation of section 1 of this Act.
    (5) In the exercise of any functions under this paragraph due regard shall be had'.

    No. 87, in page 21, leave out lines 18 to 31 and insert—

    '4.—(1) The term of office of—
  • (a) members nominated by the British Insurance Brokers' Association shall be such period, not exceeding four years, as may be fixed by the scheme;
  • (b) members elected by registered insurance brokers shall be such period as may be fixed by the scheme;
  • (c) members nominated by the Secretary of State shall be such period, not exceeding three years, as may be fixed by the Secretary of State.
  • (2) In this paragraph "the scheme" means the scheme or schemes under paragraph 2 above which are for the time being in operation'.

    No. 88, in page 21, line 34, after 'nominated', insert 'or elected'.

    No. 89, in page 21, line 41, after 'nominated', insert 'or elected'.—[ Mr. Clinton Davis.]

    I beg to move Amendment No. 90, in page 22, line 19, at beginning insert:

    'subject to the provisions of section 1 of the Borrowing (Control and Guarantees) Act 1946 or, in Northern Ireland, of section 2 of the Loans Guarantee and Borrowing Regulation Act (Northern Ireland) 1946 and of any order under those provisions for the time being in force'.
    The amendment is intended to make it clear that the council's borrowing powers are subject to the Borrowing (Control and Guarantees) Act 1946 or, in Northern Ireland, to the Loans Guarantee and Borrowing Regulation Act (Northern Ireland) 1946.

    Amendment agreed to.

    Amendments made: No. 91, in page 22, line 24, after 'nomination', insert 'or election'.

    No. 92, in page 22, line 31, leave out from 'amend' to end of line 32 and insert:

    'the provisions of this Schedule as to vary the number of members and the manner in which they are chosen or appointed'.—[Mr. Clinton Davis.]

    Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading), and agreed to.

    Bill accordingly read the Third time and passed.