Parliamentary Connections

Broadly, it is the right decision but creates several anomalies in its wake.

Firstly, people who had already started a compensation claim in the courts before the Law Lords' decision in October 2007 will get an ex-gratia payment of £5000, funded by the government, but people whose claim was not yet in the courts will get nothing.

Secondly, the MoJ decision only covers England & Wales as Scotland has already passed legislation that allows people to pursue compensation claims for pleural plaques and Northern Ireland is apparently considering going down the same route. There will be alot of frantic searching through employer records by claimant solicitors trying to find Scottish connections to claims to enable them to bring a case north of the border. This will probably only raise false hopes among people trying to claim.

The other parts of the announcement make more sense as they deal with getting the right compensation into the hands of people who are suffering the full-blown effects of asbestos related conditions much quicker. The beefed-up Employers' Liability Tracing Office is a must and it is good to see the ABI continuing to back this. Not surprisingly, the ABI is also supporting the work being done to reduce the length of time it takes to process a claim for mesothelioma which currently stands at an average of around two years. This is far, far too long for a disease that moves with relentless speed to debilitate the sufferer. It will need alot of goodwill on the part of everyone involved in the review of the claims process to get a genuine improvement, especially the solicitors who stand to earn alot less out of a much faster, more efficient system.

The MoJ has also said that it is continuing to consult on the idea of setting up a fund of last resort when an employers' liability policy cannot be traced and, once again, the ABI has been conspicuously silent on this. 

I still think this is something the industry should support and maybe it should bring a willingness to consider it to the table when looking at the claims process. It would be a sensible strategy to say that it would support a fund of last resort if many of the unnecessary (legal) costs were taken out of the system. It should also highlight that a fund of last resort would be asked to deal with three rather different basic scenarios and that these probably need to be funded separately.

The first is where the insurance industry has screwed up the record keeping and neither broker nor insurer can be found that has the correct records: this is what the insurance industry should fund. The second is where an employer was trading illegally by not having cover in place and this should probably be funded jointly, perhaps with a contribution from fines levied on employers. There is also, potentially, a small legacy from a third category which is employers who did not have cover but where the contact with asbestos pre-dates the late 60s introduction of a legal requirement to have EL cover. It is hard to argue that this should be included in an insurer funded scheme, although if the government wanted to contribute to it that would be a different matter.

Where the insurance industry really does have something to contribute by supporting the proposal for an Employers' Liability Insurance Bureau is in pressing for stiff penalties for companies (and the directors of those companies) that have broken the law by not taking out the right cover. That would leave us so much less likely to face a similar problem ever again.

Just this week there has been a debate at the Frontline Club and a session at the Search Engine Strategies London conference. I attended the latter as SES is part of the Incisive Media stable.

Speaking at the SES session were Mark Hanson from the Labour Party, Rishi Saha from the Conservatives and Mark Pack from Mandate Communications, who until recently worked for the Liberal Democrats.

There was a remarkable degree of consensus among the three of them and with the Frontline Club debate the previous evening, best summed up as cautious in terms of the claims being made for the likely impact of social media. However, the parties are putting alot of resources into it. Labour have four people dedicated to digital campaigning and the Conservatives nine. The Lib Dems predictably have a more limited national resource and have put the emphasis on local campaigning instead.

They all agreed that the biggest impact of the Obama campaign has been to get them a seat at the top table. Whereas before Obama party bosses might have been tempted to treat social media as a sideshow, now it is a central ingredient in their communications strategies.

Rishi Saha was by far the most bullish, promoting David Cameron and George Osborne as being web savvy and comfortable with new media, taking a big swipe at Gordon Brown's much-derided YouTube video at the height of the expenses scandal, drawing a stoney look from Mark Hanson but no response. The WebCameron project was hailed by Saha as an example of the ease with which the Tory leadership has embraced new media in contrast to Blair and Brown and even Hanson found himself acknowledging its success. The key tools for Labour so far have been Twitter which they like because of its immediacy and directness and also the blogsphere where they have over 100 key Labour supporting bloggers donating advertising space on their blogs.

The Tories have been quick to promote policy initiatives and reach out to potential supporters using new media in contrast to Labour where the emphasis seems to have been in communicating with its existing supporters more effectively. In this respect their new media strategies are in line with their overall approaches to the forthcoming election and their respective priorities. For Labour it is about maintaining its current support and enthusing it about the prospect of another Labour government while the Tories have to attract huge numbers of new supporters if they are to have any chance of winning the election.

The Liberal Democrats have focussed on a local strategy, particularly using Facebook, where the chance to build relationships with smaller groups of local electors appeals to them.

One feature on which they all agreed was the huge contrast with the American experience where social media's main influence was in fundraising with 99% of the money raised online going on TV advertising. In the UK, social media so far has been more about persuasion.

Whatever impact social media has in the UK election is likely to to be overshadowed by the new US-style leadership debates - this was certainly the feeling at the Frontline club. These are the key novelty and will grab alot of media and public attention. Social media will play a supporting role in this as the key commentators use it to form instant opinions on how the contestants have performed which will, in turn, shape public perceptions.

Back at SES, Mark Pack also said that we should expect the unexpected. There will almost certainly be a key 'cock-up' moment at some time during the campaign that will be caught on video and which will become huge on the internet - all the parties will be hoping that it isn't their leaders who become top ranked hits on You Tube for the wrong reasons.

It has been clear for sometime that the government was going to bow to the growing pressure from its supporters - many of them with trade union backgrounds and first hand experience of helping and advising the victims of employer negligence - and introduce some scheme(s) that would impose a a greater burden on the insurance industry. It has left it very late in this Parliament to respond (so late in fact that the consultation on the DWP proposals closes on 5 May, the day before the favoured date for the General Election). This leaves the insurance industry with a tricky judgement to make as it responds to the aspects of the proposals that it doesn't like as it risks alot of criticism for not supporting measures that are aimed at helping people suffering great pain and considerable financial hardship. That could only be worth contemplating if it thinks it could win but, even then, I would challenge whether it would be the correct stance.

The Association of British Insurers has made it clear what it can live with in the DWP proposals and what it doesn't like. It seems pretty relaxed about the government taking over and beefing up the tracing service, although there will be some arguments about who pays for it, especially given the widespread inability of the public sector to run anything involving technology on a cost-effective budget. Where it draws the line is in setting up a fund of last resort - the Employers' Liability Insurance Bureau proposed by the DWP and supported by claimant solicitors and trade unions.

I think it is very hard to argue against the principle that a safety net needs to be put in place for people who cannot trace the relevant employer and associated insurance policies. For over 40 years we have had compulsory EL insurance in this country because we accept as a matter of good public policy that everyone should have access to such cover. Just as the Motor Insurers Bureau picks up the bill (and passes it on) where there is no motor insurer to pay third party claims it seems logical that the other major class of compulsory insurance should have similar provisions in place.

The ABI is right to be concerned about the potential moral hazard of rogue employers thinking that because a fund of last resort exists they need not fork out for EL cover and this point is not adequately addressed in the consultation paper. A look across at the experience in the motor market should start to provide some of the answers, however.

For many years the problem of uninsured driving grew and reached unsustainable levels. One of the reasons for this was that the penalties put in place when the MIB and its fund of last resort were set up were woefully inadequate. A decade long campaign by the MIB and the insurance industry has ensured that this has been addressed and now driving without insurance carries some serious penalties, not least the crushing of uninsured vehicles.

If the government wants to introduce a fund of last resort for EL claims then it must put in place some serious penalties for employers - and the directors of those firms - who do not take out cover. This should include imprisonment and fines for directors of current and long-defunct companies, as well as provisions to take action against professional advisers (auditors, brokers etc) who let their clients trade without paying for EL cover.

If we were in the mid-term of a secure Labour government this would be the best strategy for the industry because it would have to accept that a bureau would be set up. However, we are potentially on the cusp of a change of government which makes the decisions on how to respond rather more difficult. I still think the industry should offer support in principle for the fund of last resort as it is the decent, humane response to this problem. It should, however, press for some proper definitions of scope (it certainly should not stray beyond supporting those who would have been covered if the statutory cover had been in place) and some draconian penalties for those who run and advise businesses who do not think that protecting their staff is a priority. This would put the ball in the court of the incoming government, a much better place for it to be.

Few people will mourn Sants' departure. 

For many he will be tainted with being asleep on watch as banks collapsed around him, starting with the unedifying sight of people having to queue in the streets for hours to take out their money from Northern Rock and continuing with the failure to spot that risk management was failing catastrophically in parts of the markets he was meant to regulate. While missing the real problems, the FSA was busy annoying independent financial advisers and brokers with its Retail Distribution Review and a raft of potentially burdensome regulations. Those are both probably slightly harsh judgements but that is how many will see his three years in charge.

What is probably more interesting is the future. Some of the coverage of his resignation has been very misleading, suggesting that the Conservatives want to abolish the FSA and merge most of what it does into a revamped Bank or England regulatory department. This is only half of the story. The other part of it is the creation of a Consumer Protection Agency that will regulate most of the retail financial services sector, including IFAs and insurance brokers. Where and how the boundary between the Bank and the CPA will be drawn is not very clear and this is the major fault line running through the Tory plans. 

Should they win the election, my guess is that the Tories will like the look and sound of Lord Turner with his stinging criticisms of socially useless financial products and give him a key role in reshaping regulation. They will then be looking for someone to head up the CPA with - remember - a brief to protect consumers, not look after practitioners. That person wouldn't have been Hector Sants, so he has been wise to depart on his terms now.

If the Tories fail to win then we will probably find ourselves in the area of a hung Parliament with the Liberal Democrats calling some of the shots. They have criticised the Conservative proposals and favour beefing up the current regime, aligning it more closely with what is coming out of the European Union (albeit that much of that is up for grabs too). Labour wants to strengthen the existing tripartite arrangement (FSA, Bank and Treasury) and ensure better co-ordination between the three. Both these approaches again probably leave Lord Turner in position but with a more consumer-facing chief executive of the FSA (which will make it feel like a CPA but without the name change and all the uncertainty). What will that person look like is the million dollar question.

With bankers currently not enjoying the highest approval ratings from Joe Public it seems unlikely that anyone who has spent a large part of their career in the banking sector is going to be considered but it is hard to see how that job can be done by someone who does not have a solid background in the financial services sector. It makes one wonder whether the ideal candidate might be someone with an insurance, pensions or retail funds background.

We are actually on the way to dealing with several of those points.

Obviously, we face a General Election within a couple of months which will see around half of all MPs replaced. The new members will, hopefully, arrive with a ready understanding of the need to radically reform Parliament and the way it remunerates and supports them. This, in turn, should deal with the second point as it seems there are still many in the House of Commons - judging by the response to events last week - who still do not understand the full extent of the anger and disillusionment that is widespread in the country.

It does look as if some of the worst cases are being dealt with severely, whether it is Labour MP Harry Cohen being denied his severance pay or the trio of Labour MPs and one Tory peer being charged with a range of criminal offences. We have to hope that they all see sense and do not hide behind Parliamentary Privilege. They all protest their innocence - let them prove that in open court where the rest of us would have to if we were in a similar position.

To complete the holding of the worst perpetrators to account I still think we should be looking to the tax authorities to scrutinise serial home flipping where it was clearly used as a dodge to avoid Capital Gains Tax.

That leaves us with transparency and I do think that we are getting there on that front, even if it does then throw some awkward questions at those who have paid MPs for various activities. The publication last week of the last few years' bookings for dinning rooms and other hospitality facilities in the Palace of Westminster did just that.

You will find various bookings made by John Greenway and Lord Hunt of Wirral in the name of some of Incisive Media's leading brands, including Post Magazine, Investment Week and the Gold Standards Awards. We have never paid either of them to make these bookings, sponsor an event on our behalf or speak at the events and neither of them has ever asked for any payment.

The government has agreed to include an exemption for financial services from the strict rules prohibiting age-related discrimination when it publishes the legislative orders that will implement the Bill's provisions (assuming that is that it is passed by Parliament before the General Election is called). This doesn't let the insurance industry off the hook entirely, however, as a degree of compromise has been necessary in order to secure the promised exemption.

The two key features of the new responsibilities that will be thrown on the industry are to produce collective data data that shows age-related underwriting to be justified and to provide a 'signposting' service to help older people find an insurer that will offer them motor or travel insurance if they are having difficulty finding cover. The response from the Association of British Insurers suggests that the insurance industry will have no difficulty in meeting the requirement for a signposting scheme, although it has been silent so far on the collection and publication of data and has previously voiced concerns about this. The argument against it has been that it could compromise the competitive position of insurers that have specialised in insurance for older people. I think the danger of this is fairly limited but if it does lead to more insurers feeling confident about offering competitive rates for older people then consumers will benefit and it is hard to argue against that. Brokers have actually welcomed the signposting proposals enthusiastically and see a key role for themselves in developing these.

The industry has been down this road before with commercial insurance for small businesses in inner city areas in the late 1980s and early 1990s. In the wake of a series of riots in inner city areas the insurance industry was accused of red-lining some districts. In those days the industry was rather less responsive to such concerns and initially point blank refused to accept that there was a problem. This, predictably, just increased the pressure on the industry until some wiser voices at the ABI were eventually listened to and a referral scheme was set up. This worked and the furore eventually died down. 

There have been no screaming headlines this time as the industry has quietly engaged with government before the issue got out of hand. Both sides deserve credit for that.

The Bill itself is making slow progress through the House of Lords at the moment where it is in its committee stage with the next session not planned until Tuesday 9 February. Even if that turns out to be the last committee session it will still have to go back to the whole House of Lords for a third reading debate before then going to the Commons for the entire procedure to be repeated. You can see why some groups - especially the churches - are taking the opportunity to cut up rough over parts of the Bill they do not like as the government cannot afford any delays in the passage of this flagship Bill if it is to get onto the statute book before the General Election is called. Latest rumours are that there will be no formal Easter recess in order to make sure this and other key Bills get through.

The loss of a vital Senate seat to the Republicans in Massachusetts earlier this week galvanised President Obama into action. You can't help wondering if he had made this announcement on Monday whether the Democrats would have held on to the Massachusetts seat such has been the favourable reception of this plan on what the Americans refer to as Main Street.

The banks loved the idea that the G20 countries would only move on major regulatory reform by agreement because they knew that such agreement would be very hard to come by. President Obama has now made it clear that he is not prepared to wait for ever for such agreement to emerge - with the threat that it would be a watered down compromise when it did. Also, he needed to act after the Senate setback was followed up by Goldman Sachs' bullish bonus announcement. Flaunting their bonus billions in the face of Main Street was a pretty inept move.

I don't want to dwell on the detail of the plan devised by Paul Volckler or look at its impact on the sector but, instead, consider some of the broader political implications.

As I have already said, the coverage from the US today suggests that it will go down well and should do alot to boost the President's approval ratings. Whether that, in turn, helps him with his healthcare reforms remains to be seen but I would expect to see him closely associated with these proposals as they work their way through Congress.

In the UK, it has made the Labour government look even weaker. The attempts of the City minister Lord Myners today to suggest that the US plans are just a different way of achieving what the UK government has set out to do look very flimsy. They clearly go way, way beyond what the UK government has proposed and will lead to many people asking why the UK can't be as tough. Already, after a little wobble this morning, the Tories have lined up behind the principle, but not necessarily the detail, of the US plans and the Liberal Democrats, who will hold the crucial balance in a hung Parliament, have given them a ringing endorsement. Both opposition parties are strongly in favour of a split between investment and retail banking as a pre-requisite of major reforms.

Looking into the European Union, this will make some of the proposals it has been contemplating so far look a little timid and that will not be what the new Commission wants, especially Michel Barnier, the new French commissioner in charge of the internal market and financial services. He has come in amid a blaze of threats about punishing those who contributed so much to the current economic woes of the world. I can't imagine he will be too happy at the Americans looking and acting tougher than the EU so expect so action when the new Commission begins work in earnest in the middle of next month.

In short, President Obama has probably unleashed a wave of even tougher regulatory reform around the world by leading from the front rather than waiting for a limited consensus.

Politics and politicians have never been held in lower esteem in this country and there is a grave danger that people will just disengage from the political process unless the campaign strikes a radically fresh tone. I am not sure that months of endless policy announcements and traditional campaigning meets that demanding requirement. 

The uncertainty over the election date lies at the heart of that problem. Having the date in the gift of the Prime Minister of the day is one of the worst aspects of 'old politics'. It has already become a game to guess the date as Labour (ab)uses this power in an attempt to wrong foot the opposition parties. I have always thought that we should have fixed term Parliaments that can only be dissolved in exceptional circumstances to put an end to this nonsense. I would be delighted if Gordon Brown turned around today and said he was going to fix the date now - late-March or early May - to end all the pointless speculation and double-guessing. It won't happen, of course, because Mr Brown is a creature born out of the current system.

MPs from all three main parties took the opportunity to air their concerns about insurers taking advantage of policyholders who are effectively trapped into dealing with a single insurer. While they acknowledged that insurance companies had agreed to continue insuring anyone in a flood-risk area who they already had on their books, they pointed out that this frequently left people with nowhere else to go. With many examples to hand of excesses rising above £10,000, the MPs argued that this was almost leaving people uninsured.

There weren't, however, any calls for action to be taken against the insurance industry to force them to offer cover at uneconomic rates and it seems unlikely that any amendments will be put to the bill during its committee stage to take us down this road. What we might see is the Department for the Environment, Food and Rural Affairs (DEFRA), looking at the suggestion from Labour MP Ian McCartney that the solution might be a collective insurance scheme administered through the water rates, rather like the insurance-with-rent schemes for council tenants.

The bill itself was given an unopposed second reading with almost every speaker, despite a few reservations, wanting to see it reach the statute books as quickly as possible.

The front page story in today's Metro goes right to the heart of what is reasonable in terms of disclosure and underwriting. It quotes the Association of British Insurers as saying that people who took out travel insurance after 2 November should have reasonably foreseen the scheduled 12 day strike by BA cabin crew. That is six weeks ago, note. Is that reasonable? I would argue that it is not and that to decline claims on those grounds would probably be seen as unfair on consumers under the new law.

As I read the Consumer Insurance Bill, underwriters would be expected to ask the prospective policyholders if they were aware of the possibility of a strike when they took out the policy. I do not think most people booking Christmas flights in the first week of November knew that there would be a strike between 22 December and 2 January. Frankly, if they did they wouldn't have booked with British Airways. If underwriters can show that insurers were clever enough to kn0w this was a likely outcome then why did they take people's premiums knowing that they were not going to pay out for this? It is this imbalance of knowledge (and thus power) that the Law Commission does not like and is trying to address in its proposals.

It might also be interesting to ponder the implications for any intermediaries who arranged travel cover for their clients that will not now payout. With the new clarity proposed on the law of agency in the Consumer Insurance Bill they might, in future, find that their clients would have a bone fide claim against them in such circumstances for not acting fully in their interests.

I would like to think the ABI might sit down with its members who underwrite travel insurance and consider whether it would be better to behave now as if the new law was in force.