Parliamentary Connections tag:blog.appgifs.org.uk,2009-03-24:/59 2010-02-26T12:08:09Z David Worsfold's unique inside view of politics, Parliament and legislation as it affects the world of insurance and financial services Movable Type Enterprise 4.32-en Edging towards a pleural plaques solution tag:blog.appgifs.org.uk,2010://59.161822 2010-02-26T11:15:43Z 2010-02-26T12:08:09Z Today's announcement by the Ministry of Justice that it is not prepared to overturn the Law Lords' ruling that pleural plaques is not a condition that should attract compensation payouts will be welcomed by the insurance industry, as the Association... David Worsfold nouncement by the Ministry of Justice that it is not prepared to overturn the Law Lords' ruling that pleural plaques is not a condition that should attract compensation payouts will be welcomed by the insurance industry, as the Association of British Insurers has been quick to confirm. It is, however, a messy decision that will leave alot of people dissatisfied.
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.
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]]> Will this be the Twitter election? UK political parties look for Obama lessons tag:blog.appgifs.org.uk,2010://59.161724 2010-02-18T09:21:03Z 2010-02-18T10:35:13Z Just how important is social media going to be in the forthcoming General Election campaign? After the huge excitement generated by the Obama campaign's use of social media during his successful campaign in 2008 all three main parties in the... David Worsfold 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.
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]]> Insurers need to be careful in opposing the DWP's employers' liability reforms tag:blog.appgifs.org.uk,2010://59.161658 2010-02-11T09:50:45Z 2010-02-11T10:44:38Z The insurance industry has been placed in a difficult position with the publication of the Department of Work and Pensions' proposals for dealing with people suffering work-related diseases who cannot trace an employers' liability insurer. Despite the best efforts of... David Worsfold proposals for dealing with people suffering work-related diseases who cannot trace an employers' liability insurer. Despite the best efforts of the industry with its policy tracing service and code of practice (introduced in 1999), there is a stubborn 2% of EL claims where an insurer cannot be traced. This amounted to 3210 people in 2008, a not insignificant number especially when you take into account the immediate family members who share the burden of coping with the consequences of a debilitating condition. 
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.

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]]> Sants' departure from the FSA clears the way for reform of regulation tag:blog.appgifs.org.uk,2010://59.161630 2010-02-09T14:01:32Z 2010-02-09T15:00:51Z The surprise announcement this morning by the chief executive of the Financial Services Authority, Hector Sants, that he will leave by the summer presents a golden opportunity to re-model the way financial services regulation is delivered in this country. With... David Worsfold Lord Turner and now a new chief executive in the offing there will be little temptation on anyone's part to defend the regulatory status quo regardless of who wins the forthcoming General Election.
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.
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]]> Expenses scandal just won't go away. Do we pay? No? tag:blog.appgifs.org.uk,2010://59.161616 2010-02-08T09:41:40Z 2010-02-08T10:30:10Z The colourful, shaming saga of the abuse of Parliamentary expenses just refuses to go away. It is hard to see how it can until several things happen. A new Parliament has to be elected; a new expense system has to... David Worsfold 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.
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]]> Equality Bill moves towards compromise on travel and motor insurance tag:blog.appgifs.org.uk,2010://59.161575 2010-02-03T11:48:09Z 2010-02-03T12:21:56Z The insurance industry looks to have done an very good job in its lobbying over the Equality Bill and, in particular, heading off the threat that some classes of insurance, such as travel and motor, might find themselves in a... David Worsfold Equality Bill and, in particular, heading off the threat that some classes of insurance, such as travel and motor, might find themselves in a straightjacket when it comes to age-related underwriting.
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.

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]]> Obama bank plan puts UK on the defensive and EU in the shade tag:blog.appgifs.org.uk,2010://59.161432 2010-01-22T15:28:16Z 2010-01-22T16:30:12Z Barak Obama has clearly run out of patience, not just with Wall Street but with other governments and financial regulators around the world. His shock announcement yesterday of a a radical new regulatory regime for the banking sector has obviously... David Worsfold 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.

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]]> Welcome to the five (or is it three) month election campaign tag:blog.appgifs.org.uk,2010://59.161191 2010-01-04T10:08:10Z 2010-01-04T10:31:52Z Today seems already to have been declared the official start of the General Election campaign with a barrage of announcements from all the major parties. I wonder how this will play out with the electorate?Politics and politicians have never been... David Worsfold 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.
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]]> Flood debate raises insurance concerns tag:blog.appgifs.org.uk,2009://59.161107 2009-12-17T12:21:07Z 2009-12-17T12:41:33Z Tuesday evening's second reading debate on the Flood and Water Management Bill saw the insurance industry come in for criticism for steep rises in excesses and premiums for people in flood-prone areas.MPs from all three main parties took the opportunity... David Worsfold 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.
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]]> BA travel insurance row shows why consumer insurance law reform is needed tag:blog.appgifs.org.uk,2009://59.161081 2009-12-16T08:44:32Z 2009-12-16T09:13:18Z The day after the Law Commission published its Consumer Insurance Bill we are faced by a very good example of why it is needed as a row has broken out over how far travel insurers are obliged to cover people... David Worsfold Law Commission published its Consumer Insurance Bill we are faced by a very good example of why it is needed as a row has broken out over how far travel insurers are obliged to cover people caught up in the British Airways strike.
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.

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]]> Consumers look set for better deal on insurance as the industry swings behind Law Commission proposals tag:blog.appgifs.org.uk,2009://59.161063 2009-12-15T09:22:42Z 2009-12-15T10:02:32Z The decision of the Association of British Insurers to drop its earlier opposition to the Law Commission's proposals to reform insurance contract law for personal lines business is good news. Earlier this year, when the All Party Group on Insurance... David Worsfold Association of British Insurers to drop its earlier opposition to the Law Commission's proposals to reform insurance contract law for personal lines business is good news. Earlier this year, when the All Party Group on Insurance & Financial Services met the Law Commission and the ABI, the insurers' trade body expressed some serious reservations about moving away from the century old law based on the traditional 'Buyer Beware" (Caveat Emptor) principle. It felt that the Law Commission's approach could force insurers to pay claims on policies that it would never have issued had it known all the facts. These objections did not impress MPs.
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.

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]]> Government action on asbestosis liabilities moves closer by the day tag:blog.appgifs.org.uk,2009://59.160964 2009-12-07T16:02:35Z 2009-12-07T16:46:33Z The possibility of government action over asbestos liabilities seems to edge steadily closer. Two recent exchanges in Parliament illustrate the point.Last Monday, Baroness Turner, a Labour peer and long time deputy chair of the All Party Parliamentary Group on Insurance... David Worsfold 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.
]]> UK financial services is now a clear EU target tag:blog.appgifs.org.uk,2009://59.160803 2009-11-30T08:29:23Z 2009-11-30T09:05:08Z There is only one way to sum up the shake-up in the European Commission portfolios from a UK perspective - we were totally stuffed. We lost out lock, stock and barrel, leaving the UK financial services sector looking very exposed... David Worsfold European Commission portfolios from a UK perspective - we were totally stuffed. We lost out lock, stock and barrel, leaving the UK financial services sector looking very exposed to attack from those who believe that its free-market 'Anglo-Saxon' approach to regulation and market behavior lies at the heart of the financial crises of the last two years.
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.

]]> Plenty to keep the insurance industry occupied in Parliament's final session but what will make it over the finishing line? tag:blog.appgifs.org.uk,2009://59.160671 2009-11-23T11:07:37Z 2009-11-23T12:04:36Z The political arguments about the Queen's Speech might still be raging but my plea to the insurance industry is not to be fooled by those into failing to have a good look at what is coming up in Parliament in... David Worsfold 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.
]]> Latest All Party Group newsletter is out tag:blog.appgifs.org.uk,2009://59.160641 2009-11-18T17:30:26Z 2009-11-18T17:37:42Z David Worsfold All Party Parliamentary Group on Insurance & Financial Services is now available. It covers the busy first few weeks of the autumn session and can be downloaded here APPG News26.pdf
The second half of the session will see the group meeting the Association of Independent Financial Advisers, Aviva and the Institute of Insurance Brokers.
If you would like to be added to the email list to receive the newsletter please contact me at david.worsfold@incisivemedia.com
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