My Lords, I commend the thinking behind the Bill, seeking as it does to improve matters for business in our island nation. I shall concentrate on just three areas: late payment of insurance claims, gold-plating of EU directives and the attitude of regulators. I declare my interests as set out in the register, in particular as an employee of Hiscox insurance group for 25 years, much of it at a senior level.
First, on the late payment of claims provisions, I note that these are substantially the same draft clauses dropped due to time pressure from what is today the Insurance Act 2015, but with important additional wording that would prevent the ability to contract out of the new obligations. I have been in touch with the British Insurance Brokers’ Association—BIBA—which represents nearly 2,000 insurance intermediaries and has additionally as partners the bulk of British insurance carriers. It is, as am I, highly supportive of these provisions. I know well from long experience that those insurers which seek to pay valid claims rapidly look on with frustration at the small minority of competitors which make a business of not doing so. These provisions would be a great help for small businesses—the small and the brave—which are the bedrock of our nation’s prosperity today and a foundation for its prosperity tomorrow.
I spoke in this House in the debate on the gracious Speech about the problem of gold-plating older EU directives, something recognised by our EU neighbours who refer to it as “sauce anglaise”. I stress the word “older”. In 2011, the coalition Government brought in an admirable fresh approach to the bringing of EU directives into UK law. Not only were great efforts to be made to avoid gold-plating, but also things have become self-correcting through the use of review and sunset clauses in the regulations concerned. The previous Labour Administration latterly tried to prevent gold-plating, really in the wake of the excellent Davidson review of 2006. However, the absence of the default use of review and sunset clauses means that EU directives brought into UK law in the period from 2006 to 2011 generally have no mechanism to self-correct. The situation for directive-driven legislation prior to 2006 is that there is plenty of gold plate about, as the noble and learned Lord, Lord Davidson, found. Does the Minister agree that these older, pre-2006 bits of EU-inspired legislation represent potentially very rich pickings for the Government’s target to save £10 billion in red tape?
A particular case in point is the insurance mediation directive, or IMD, which dates from 2002 and was put into effect in the UK in January 2005. BIBA told me
today that,“the UK is the most expensive regulatory regime on the planet, five times the cost of our major competitors and fourteen times the global average”. That is not so much gold-plating as lead-plating, which prevents our world-leading insurance intermediaries fulfilling their full potential. To put the size of this industry in context, BIBA also advises that its intermediary members employ 100,000 staff and account for 1% of UK GDP. UK insurance intermediaries are regulated by the Financial Conduct Authority, the FCA. Will the Minister confirm that the FCA is to be named as a specified regulator by the Secretary of State for the purposes of the Bill? For the older, gold-plated situations I described, the admirable regime envisaged by the Bill will apply only if the regulators concerned are specified by the Secretary of State, so I urge that he is very thorough here. I agree entirely with the words of the noble Lord, Lord Leigh.
Finally, I turn to the attitude of regulators. The best regulators in my experience over many years and in quite a few countries take a very helpful and collaborative approach. However, bad regulators can treat those that they regulate aggressively and as if assuming non-compliance, and/or use poor enforcement and/or excessive monitoring requirements, all of which can turn straightforward regulation into a costly and disruptive burden. I very much welcome Part 2 of the Bill, which in particular will allow those being regulated to feed back what it feels like, leading to a sort of reverse naming and shaming. That is likely to be a healthy step in driving a change in approach for those regulators that need to improve. However, it is important to patrol the fear that some have, well-founded or not, that if they complain about their regulator they could be subject to additional scrutiny from it, and thus be discouraged from giving useful feedback. I am not sure at this stage how that is best dealt with. Additionally, it is important to consider to whom the reports contemplated in the Bill are best addressed so that there is a clear potential for sanction where a regulator performs consistently badly. Again, I am grateful to the Minister for the opportunity to discuss this shortly. That said, this is an excellent Bill overall and I wish it well in its passage through Parliament.
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