My Lords, I have not spoken before on this Bill and, indeed, I would not have spoken had I not seen the amendments tabled by the noble Earl, Lord Kinnoull. I was very happy to see Clause 20 in the Bill and I would not have spoken had it not been threatened in some way. I should explain that I was a member of the Special Public Bill Committee which considered the Insurance Bill which became the Insurance Act 2015. As noble Lords may be aware, that was a Law Commission Bill, which is handled under the special procedure in your Lordships’ House, which means that the Law Commission produces technical amendments to the law and they go through on the basis that they are uncontentious.
Clause 20 that we have before us appeared in the draft legislation which the Law Commission put forward, but when the Government tabled their Bill for consideration by the Special Public Bill Committee it did not include that clause. We examined that very carefully as part of the Insurance Bill Committee. I believe the Government deemed the clause was contentious because of lobbying by the Lloyd’s Market Association and the International Underwriting Association. At the final stage of the Special Public Bill Committee, I introduced an amendment in precisely the terms in Clause 20, which is not my cleverness in drafting but the drafting of the Law Commission in the original Bill. I should say that the Law Commission contacted me last week, and it remains of the view that this is an important change to the law which it fully stands behind.
Needless to say, in the Special Public Bill Committee—which is a version of Grand Committee, in effect—that was not pressed. I was then leaned on—noble Lords may be shocked at this—by the powers that be in my party organisation not to move the amendment again on Report. The Government then managed to schedule the business on a day when I was not able to be in the House, so that was an end to it, so the Insurance Bill went through without properly considering the issue. While the Lloyd’s Market Association and the IUA remain against the clause, others in the insurance industry are quite content for it to go through, and we were quite clear in the Special Public Bill Committee that the weight of opinion in the insurance industry, setting aside the two organisations that the noble Earl mentioned, was in favour of this amendment, even though the Association of British Insurers thought that there might be a possibility that it would lead to claims management company activity, which is one of the scourges of the financial services industry at the moment. While that might have an undesirable consequence, it was not a good reason not to legislate for something that was right.
I find it difficult to understand why there could be an objection to a clause which just states,
“the insurer must pay any sums due … within a reasonable time”,
with reasonable time being well defined to cover what one would think would be a reasonable prospect of excuse for non-payment and therefore not imposing any particular amendment. The noble Earl’s amendment seeks to knock out reinsurance contracts—I rather take the view that they are between consenting adults and need not form part of this—and large risks. Large risks might sound as if they are huge things that are of no concern to small companies, but they are well within the ambit of many medium-sized companies in this country. One piece of the evidence that the Mactavish Group produced in the context of the Special Public Bill Committee and for the Treasury when it was considering what to do with this showed that in the previous four years 40% businesses with a turnover of more than £50 million had suffered strategically significant losses, that 45% of their claims were disputed and that the average time for resolution was three years. If you are a medium-sized company with a strategically significant claim which is being held up and takes a long time, it could be the difference between survival and business failure. It seems only right and proper that we should have within insurance law, fully in line with the Law Commission’s recommendations, an implied term of reasonableness of payment. I hope very much that the Minister will resist these amendments.