Parliamentary Connections

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.

Fortunately, wiser counsels have prevailed in the ABI since then. There was always a feeling that the ABI membership was divided on this issue as its objections did not carry alot of conviction.

At the heart of the proposals is a genuine switch in the balance of power between policyholder and insurer with a three tiered approach to meeting claims.

If the Consumer Insurance Bill becomes law insurers will have to ask direct questions about any information they need to underwrite the risk and, if consumers have taken reasonable care in answering those questions, claims will have to be paid in full. This will apply even if an honest and reasonable mistake has been made by the policyholder. If a claimant is found to have been careless in answering a question, however, then the insurer will be entitled to reduce the payout dependent on what it would have done had it known the full facts at the time the policy was taken out. Only if there is deliberate misrepresentation will an insurer be able to decline a claim.

Insurers will be banned from using the current basis of contract clauses, such as "failure to disclose any material information may invalidate your insurance cover", further emphasising the switch towards better consumer protection that the Law Commission is proposing. The bill will also clarify the law of agency as it applies to insurance brokers and intermediaries by introducing a statutory code based largely on existing law and supplemented by current Financial Ombudsman Service guidance and industry practice.

The ABI still has some fears that the bill could be amended as it goes through Parliament to make the provisions even more consumer-friendly. I think that now some of the controversy has been taken out of the debate that there is much less likelihood of this and that the bill could move very swiftly through its Parliamentary stages, although it has to be touch and go whether it will make it into law before a General Election is called. We may well find ourselves still debating this in a year's time.

Following on behind this will be reforms of commercial insurance contract law which the Law Commission is currently working on. Whether these prove to be as radical remains to be seen.

Last Monday, Baroness Turner, a Labour peer and long time deputy chair of the All Party Parliamentary Group on Insurance & Financial Services, asked the government what it was doing about the problem of tracing employers' liability insurers and eventually forced the government minister, Lord Mackenzie, to admit that it was looking at establishing an employers' liability bureau - an insurer of last resort - to deal with the still unacceptably high proportion of insurers that cannot be traced. Lord Mackenzie said that a mere 52% of insurers were traced by mesothelioma sufferers despite all the mechanisms put in place.

By Wednesday, this apparently reluctant admission by a government minister that a fund of last resort was being actively considered was replaced by an upfront announcement and a promise to come back with more information soon. This came during a debate initiated by Labour MP Alison Seabeck on asbestos-related illnesses in Plymouth when junior Justice minister Claire Ward promised more information on a possible employers' liability insurance bureau shortly.

She also told MPs that the government had held a meeting of medical and legal experts on 15 October to see if it was possible to hammer out some sort of consensus on pleural plaques and that a decision on this would also be announced shortly. There is a bill being promoted by former City minister Baroness Quin to reverse the House of Lords' judgement that pleural plaques are not a compensatable condition which has all party support and is waiting a date for a second reading debate. A similar bill was making its way through the House of Commons before the summer recess but ran out of time and a judicial review is currently underway in Scotland. There was also an Early Day Motion on the subject tabled in the House of Commons last week.

It does look as if the insurance industry is on the back foot on this one and many will consider that perhaps it is time to give in graciously over establishing a fund of last resort given the dreadful state of employers' and insurers' records. Pleural plaques is a more difficult  issue, easy to be emotional about but hard to be objective. I think that it is right that society, through Parliament and the courts, is asked to make a reasoned decision on this and that the insurance industry's viewpoint is heard. The argument may be slipping away from the industry but people do need to recognise that this is not a hard-hearted stance but a logical position to take in the face of the medical evidence.

The upshot of the government's mishandling of the discussions about the distribution of key EC portfolios is that the UK is in the weakest position in the EU since it joined in 1973.

It all started with the misguided promotion of Tony Blair as a candidate for the new post of permanent president of the commission. A survey of the European press will show all too clearly that the only people who took this seriously were 10 Downing Street and the Daily Mail - it was a non-starter as far as the rest of Europe was concerned. Having woken up late in the day to the fact that the Blair campaign was doomed to failure, Gordon Brown then focussed on the other new post covering foreign affairs. There was a false start with the attempt to put forward David Milliband as a candidate but he had the sense to see that this was potentially a political backwater and refused to have anything to do with it. But the UK government had convinced itself that this was a deserved consolation prize for not getting the presidency and was being encouraged in this thinking by France and Germany. So, step forward Lady Ashton whose best qualification for the job seems to be that she has taken a few foreign holidays.

Having sold the UK a pup, the French and Germans then had the field to themselves in carving up the key economic portfolios and so Frenchman Michel Barnier ended up in the internal market and financial services beat with a clear mandate to focus on the City of London. The Germans wanted, and got, energy.

Lining up alongside Barnier in the other economic portfolios will be two liberals - Finland's Olli Rhen (trade) and Karel de Gucht of Belgium (economic and financial affairs) - neither of whom can be expected to be slow in supporting tougher regulation of financial markets. To complete this gloomy picture is the appointment of a Spanish socialist - Joaquin Almunia - as competition commissioner.

It looks as if the UK's financial services sector will have to look outside the Commission for support and is likely to find itself increasingly reliant on the European Parliament to get its voice heard which will make the role of UK Liberal Democrat MEP Sharon Bowles even more important to the City than it was before. She chairs the parliament's economic and monetary affairs committee which has to approve any Commission proposals on financial regulation before they can be passed into EU law. In her few months in the post she has proved a safe and sensible pair of hands when it comes to the rushed attempts to force through new regulations on hedge funds. I imagine quite a few public affairs departments in the City will be looking her up this week.

Top of that list must be the Flood and Water Management Bill which enacts most of the proposals put forward by Sir Michael Pitt following the serious flooding in the West Country, Yorkshire and Humberside in 2007. This will shoot to the top of the agenda after last week's terrible flooding in Cumbria. Looking through the summary of the main provisions in the bill, it looks as if the insurance industry will be pretty comfortable with what the government is putting forward. The danger will come from attempts to add to it as it goes through Parliament. There is, for instance, a head of steam building up around the National Flood Forum's campaign to force insurers to offer significant premium discounts to householders who install their own flood defences and I expect this to be raised as the bill goes through Parliament.

Also of importance to insurers will be the continuing debate around the Equality Bill and the possibility of specific statutory requirements being imposed on the travel insurance market to prevent age discrimination. This Bill didn't complete its Parliamentary passage in the last session and has been re-introduced with its final House of Commons debate scheduled for 2 December. From there it will go to the House of Lords where travel insurers can expect to be attacked for the scarcity and cost of cover for the over-70s.

It will be impossible to ignore the Financial Services Bill which aims to deliver the government's promises to make the tripartite system more effective by creating a Council for Financial Stability, impose statutory controls on bankers' pay and improve systems for consumers claiming compensation for the failure of institutions or individual products. Among the proposals for better consumer protection are an extension of the remit of the Financial Services Compensation Scheme and a new provision to allow a single representative case to go to court to establish the liability and scope of failure of a product, advice or regulation. Many of the debates on the bill will be high profile as the three main parties attempt to stake out distinctive territory on the future of financial regulation, the City and bankers' pay. That does not mean that there will not be some devil in the detail.

A further piece of legislation for the insurance industry to keep an eye on will be the Civil Law Reform Bill. This is being introduced as a draft bill which means that it is unlikely to make it to the statute book before the General Election. It does, however, contain alot to interest the insurance industry including new proposals for assessing damages following fatal accidents and the long promised reforms of insurance contract law for personal lines promised by the Law Commission.

If this wasn't a long enough agenda a private members' bill has been introduced into the House of Lords by the Labour peer Baroness Quin to make it law to award compensation for pleural plaques. It isn't clear as yet how far this is likely to progress but it has already been given an unopposed first reading and is waiting for a date for a more detailed debate. This will be a difficult one for the insurance industry and will need all the Association of British Insurers' experience and skills in lobbying to put the case against the bill without attracting too much criticism for insensitivity and callousness.

This is a long list of important pieces of legislation that will require alot of input from the insurance industry to ensure that it gets what it wants. It may also find that it has to bid a retreat on some issues, such as age discrimination and travel insurance, if it is not to find itself at loggerheads with public opinion or in the uncomfortable position of attempting to defend the indefensible. The biggest danger, however, is that much of this legislation might be passed in great haste and be poorly drafted as a result. When Gordon Brown finally names the day for the General Election this will initiate frantic negotiations between the parties' business managers to decide which legislation gets forced through in what will then be barely a week left of Parliamentary sittings. This usually means that huge chunks of legislation get passed without any debate or proper scrutiny - inevitably some of that is flawed. It is a very unsatisfactory way of dealing with important issues.