Regulation by the Financial Conduct Authority

Civil Liability Bill [Lords] – in a Public Bill Committee am 2:00 pm ar 11 Medi 2018.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Gloria De Piero Gloria De Piero Shadow Minister (Justice) 2:00, 11 Medi 2018

I beg to move amendment 17, in clause 8, page 7, line 15, at end insert—

‘(4A) The Treasury must, within one month of the passing of this Act, make regulations specifying that the Financial Conduct Authority is to require all insurers holding a licence to offer UK motor insurance to publish a report—

(a) on the loss cost savings achieved as a result of the provisions of Part 1 of this Act; and

(b) how, and the extent to which, such savings have been applied to reduce motor insurance premiums.

(4B) The first such report from insurers must cover the period of 12 months beginning with the first day of the month immediately after the commencement of Part 1 of this Act and must be sent to the Financial Conduct Authority by the end of the period of 15 months beginning with the commencement of Part 1 of this Act.

(4C) The Financial Conduct Authority will require further annual reports.

(4D) The Financial Conduct Authority, within the period of 18 months after the commencement of Part 1 of this Act, must make and publish a reasoned assessment of whether it is satisfied that every insurer covered by this section is passing on to customers any loss cost savings made by those insurers arising from Part 1 of this Act.

(4E) Regulations made under subsection (4A) must make provision for the Treasury to grant powers to the Financial Conduct Authority to enforce a requirement for insurers to pass on loss cost savings, achieved as a result of the provisions of Part 1, from insurers to consumers through a reduction in the cost of premiums if, after the period of 30 months following the commencement of this section, the Financial Conduct Authority advises the Treasury that such powers are necessary.”

This amendment would require the Financial Conduct Authority to require insurers to report on the savings they have made as a result of this Bill and the extent to which such savings have been passed on to insurance consumers.

Photo of Henry Bellingham Henry Bellingham Ceidwadwyr, North West Norfolk

With this it will be convenient to discuss the following:

Government new clause 2—Report on Effects of Parts 1 and 2.

New clause 6—Passing on savings made by insurers.

‘(1) Any savings made by any insurer as a result of anything in this Act or associated changes by regulation shall be passed to policyholders by way of reduced premium.

(2) The Financial Conduct Authority shall require all such insurers to submit an annual report detailing the savings they have made and how all those savings have been used to reduce policyholder premiums.

(3) In this section—

“savings” means any reduction in an insurer’s outlays in damages or costs paid in personal injury claims from the time this Act receives Royal Assent;

“insurer” means any insurer holding a licence to offer UK motor insurance;

“policyholder” means the holder of a policy of motor insurance with the insurer;

“premium reduction” means a reduction in the annual cost of a policy of motor insurance taken out by a policyholder.”

This new clause would require insurers to pass on to insurance consumers all savings made as a result of these changes.

Government amendments 5 and 6.

Photo of Gloria De Piero Gloria De Piero Shadow Minister (Justice)

Amendment 17 would require insurers to report on whether savings have been passed on to consumers. New clause 6 would require insurers to pass on all savings as a result of the changes to consumers. Unlike the Government’s over-wordy, over-complicated new clause 2, which I will discuss shortly, amendment 17 and new clause 6 are straightforward. They would require the Financial Conduct Authority to insist that insurers report on the savings they have made as a result of the Bill, and the extent to which such savings have been passed on to policy holders. There are no caveats, no get-outs—it is a straight-line requirement to do the right thing.

The Bill is the latest in a long line of Government handouts to the insurance industry. Back in 2012 in a closed-door meeting at No. 10, the insurers—in return for being able to set the fixed costs in the new fast track that the new Legal Aid, Sentencing and Punishment of Offenders Act 2012 introduced—promised to reduce insurance premiums. Since then, insurers have saved more than £11 billion; those are Association of British Insurers figures, not my own. As the Minister must concede, motor insurance premiums are higher now than they were then. So much for those promises.

In the Bill, the Government have, again, swallowed hook, line and sinker the insurers’ promises that they will reduce premiums. History is repeating itself. Insurers are making record profits: Direct Line’s profits in 2017 jumped by 52% to £570 million and Aviva recorded a profit of £1.6 billion. No, that is not all motor related, but in the case of Direct Line it will largely be so.

Meanwhile, insurer CEOs are on multimillion pound packages—Paul Geddes from Direct Line and Mark Wilson from Aviva made more than £4.3 million each in 2017. We are now discussing measures that will save the insurers £1.3 billion a year. Of that, the insurers might—if the wind is blowing in the right direction and none of the ludicrously large get-out clauses in new clause 2 apply—hand across up to 80%. Notably, the cuts to insurance premiums of £35 a year, which insurers are promising now, are much lower than the previous estimates of £50 per year promised in the Prisons and Courts Bill. The Government represent a party that claims to oppose red tape: here is a chance for them to avoid it. Let us have a simple clause that does what it says on the tin.

That leads me to Government new clause 2, which is as full of red tape as it is holes. Perhaps my most fundamental question to the Minister is this: what is wrong with the word “will”? The new clause is peppered with the word “may”. If the Government are genuinely committed to ensuring that savings are passed to consumers, why do they not insist that that happens? Paragraph 3 includes provision for all kinds of ways in which, by regulation, insurers should provide information. Is there any reason why that information should not be made publicly available?

Paragraph 4 is a catalogue of reasons why insurers could wheedle out of being transparent and evade passing on the very substantial savings that the Government’s impact assessment makes clear they will be making. The truth is that all the Government have managed to extract from the insurers, who stand to gain massively from this Bill, is a vague promise that they will pass on savings.

Embarrassed by the lack of hard evidence for a commitment, the Government have tabled this new clause, which is riddled with get-outs and opportunities for insurers to worm their way out of the flimsy commitments they have made. We know—and if the Government are honest, so do they—that insurers will seek to avoid paying the savings that they make back to policy holders. That is what happened when they last made promises in 2012. Given the weakness of the new clause, that is what will happen again.

In truth, the Government have rolled over and the new clause is simply a fig leaf to cover their embarrassment. The answer, I suggest, is to include a simple clause that—and I use a phrase from Conservative Back Benchers on Second Reading—will

“hold the insurance industry’s feet to the fire.”—[Official Report, 4 September 2018; Vol. 646, c. 111.]

Our new clause would mean that any savings made by any insurer as a result of anything in this Act, or associated regulation, will be passed to policy holders by way of reduced premiums. What could be simpler? The Minister may notice that our proposed new clause quite deliberately refers to

“savings made…as a result” of changes by this regulation.

The Government have refused to include in the Bill the small claims changes that they propose; we will come back to that issue later in our other amendments. What is crucially different between the Government’s new clause 2 and our new clause 6 is that our new clause is not only simpler but mentions the savings that insurers will make from the small claims changes.

In calculating the £1.3 billion in savings that the insurers will make every year, the Government’s impact assessment includes the savings created by the increase in the small claims limit as a result of the so-called wider package of measures. For the Government not to include the savings made from the small claims limit changes in their new clause 2 renders it virtually worthless, and undermines their much-vaunted and fundamental promise that motor insurance premiums will drop by £35 a year.

Photo of David Hanson David Hanson Llafur, Delyn

It is a pleasure to serve under your chairmanship today, Sir Henry.

I know it is a long time ago, but I will take the Committee back, if I may, to 25 November 2015, when George Osborne, as he is now known, was the Member for Tatton and serving as Chancellor of the Exchequer. At that time, he said—it was recorded in Hansard:

“We will bring forward reforms to the compensation culture around minor motor accident injuries, which will remove… £l billion from the cost of providing motor insurance.”

And here is the crucial bit:

“We expect the industry to pass on this saving, so that motorists see an average saving of £40 to £50 per year off their insurance bills.”—[Official Report, 25 November 2015; Vol. 602, c. 1367.]

When this Bill was introduced to the House of Lords and subsequently to this place, the Ministry of Justice’s impact assessment indicated at first that the figure would now be £40, not £50—not between £40 and £50, but £40. However, when the general election was fought last year, the figure had miraculously gone from £40 to £35.

In October last year, one of the insurance companies that the Minister in another place, Lord Keen of Elie, has been fond of quoting—Liverpool Victoria or LV=—spoke. Caroline Johnson, director of third party and technical claims at LV=, spoke at the Motor Accident Solicitors Society’s annual conference in Sheffield, which must have been an important place to say this; it was not just said off the cuff, but at the conference. She said, “The £35 may or may not be achievable”.

I ask my first question today in support of the new clause tabled by my hon. Friend the Member for Ashfield and to start the testing of the Minister’s new clause. In his response, can the Minister give the latest Government assessment of what the £50/£40/£35/possibly-not-achievable £35 is as of today? We are expected to take on trust the figures that he has given.

There is no doubt that the insurance companies will save £1.3 billion a year. That figure has been accepted by the Government and the insurance companies, and I suspect that it will be cited again—not only by my hon. Friend the Member for Ashfield, but by others who will say that it is the saving, the prize, that the Government seek. My concern is not the insurance companies and the £1.3 billion; my concern is how much, if there are savings to be made in the areas we are concerned about, of that £1.3 billion will land in the pockets of those individuals who would then have lower premiums as a result.

I am very pleased to sit on the Justice Committee, just as I was very pleased to sit coterminously this morning with this Committee; I have to say that was very interesting. The Justice Committee carried out an investigation into this area and came to a conclusion as a whole—it was not just the Labour members of that Committee. It is chaired by the hon. Member for Bromley and Chislehurst (Robert Neill), who is a Conservative; it has a Conservative majority; and it has unanimous support for the recommendations it made in this very area. The Committee said:

“As obtaining insurance involves a commercial transaction with a private sector body...there is little that the Government can do to enforce lower premium rates without significant change to present policies.”

My question to the Minister is about his proposed new clause 2. There is something I cannot find in it—it may be hidden in there within the legalese—but, if it is, could he please put it in simple language for the Committee? What happens if this investigation proves that the insurance companies have made a saving of anything between nothing and £1.3 billion? What steps will the Government take at that stage to enforce their policy objective of ensuring that £50/£40/£35/possibly £35 goes into the pockets of individuals who pay the insurance companies?

Government new clause 2 says the assessment will be made on 1 April 2024. Half this Committee might be dead by then—that is just under five and half years from now, and I hope we are all here to see it. I have been round the goldfish bowl a couple of times already this year on Bill Committees; I cannot remember what I did last year on some Committees because we are busy people in this House. Who is going to hold the Government to account on 1 April 2024 when it comes to the report produced by the Financial Conduct Authority, put into effect by the Government’s proposed new clause 2?

I want the Government today to say not just that they will publish that report, but that they will put that report forward for debate in the House, whoever is in the House on 1 April 2024, and agree some mechanism. The Minister could outline that now because he has six years to find out how to work it before this report comes out. Will he outline to the Committee today what mechanism he is going to put in place to force the insurance companies to give back any premiums that they might be making as a result of these savings?

We are talking about the Parliament after next, in 2024. I do not want to turn up at some future Parliament when, if everything in proposed new clause 2 goes hunky-dory, an insurance company comes along and says to the Financial Conduct Authority, “We’ve made £300 million or £500 million; we’ve saved £1.3 billion.” What are the Government going to do or say when that figure comes out? I cannot find it. It might be in here hidden away, but I would like the Minister to tell me what the Government are going to do if a figure of surplus, as a result of these savings, is made, and it has not been returned to consumers.

I would like to know what rigour the Government are going to put in place with the Financial Conduct Authority, to ensure that it is rigorously examining the costs and services. If I were a smart insurance company, I would find some costs to show that actually, although I may have saved £1.3 billion on this, I have had difficult challenges such as renewed claims, and this and that. I am not involved in the insurance industry. I could probably, if I spent the next week thinking about it, find 10 reasons why my costs had increased and that £1.3 billion had been subsumed.

The Minister has a duty to tell the House, with regard to proposed new clause 2, what he expects the Financial Conduct Authority to do. The whole premise of the Government’s proposal has been that this is going to stop insurance companies from having extra costs, and those extra costs are going to be passed on to us—to everybody who has a car—in saved premiums.

The Government’s figure, with which I started my contribution, has gone from £50 in November to £15 to £35 now, with the insurance companies themselves saying that £35 may or may not be achievable. “May or may not” is quite a loose phrase; “may or may not” means we do not yet know what the figure is. I would like to know from the Minister not just what we are going to find out on 1 April 2024: whenever this legislation is enacted, there will be a period between then and 1 April 2024. My hon. Friend the Member for Ashfield’s proposal says we should look at the figures earlier than 2024. I would like to know what the insurance companies are saving in 2019, 2020, 2021, 2022 or 2023—and, indeed, in 2024.

Photo of Lloyd Russell-Moyle Lloyd Russell-Moyle Labour/Co-operative, Brighton, Kemptown 2:15, 11 Medi 2018

Is it not the case that the best time for an assessment to be made would be in the first year following the changes—not years down the line?

Photo of David Hanson David Hanson Llafur, Delyn

My hon. Friend makes a valid point; it is one I had not thought of and I am grateful to him for bringing that to the Committee’s attention. If this saving is going to be made, it would be sensible to say whether it is made early on, because downstream, as my hon. Friend indicated, there will no doubt be a tapering.

To be honest with the Committee, the Minister is only proposing new clause 2 because he got done over in the other place by Members of the House of Lords and could not get the Bill through the House of Lords without this new clause. He got done over in the other place because the Justice Committee unanimously called for

“the Financial Conduct Authority to monitor the extent to which any premium reductions can be attributed to these measures and report back to us after 12 months.”

I go back to the all-party Justice Committee, chaired by a Conservative MP, with a Conservative majority, which said in its report on this Bill that there should be a report within 12 months. We have been helpfully reminded by my hon. Friend the Member for Brighton, Kemptown why we suggested that at the time: because we wanted to see the impact within 12 months.

On the amendment tabled by Lord Sharkey in the House of Lords, Lord Keen, the Minister dealing with this in the other place, said on Report:

“the Government are not unsympathetic to the underlying intention of Amendment 46, as tabled by the noble Lord, Lord Sharkey. The point is that having made a firm commitment, insurers should be accountable for meeting it.”—[Official Report, House of Lords, 12 June 2018; Vol. 791, c. 1632.]

That is what this Minister’s colleague said in the House of Lords, and I do not disagree with it. I only say to the Minister that April 2024 seems a tad far in the future to secure the proposals that he is putting to the Committee today.

The Minister needs to say firmly to the Committee what he anticipates the savings to be now, how he will monitor what the insurance companies are making—not just now, but in the next five years—and how he will hold the insurance companies to account. How will he ensure that, whatever date we end up with—be it 1 April 2024 or, if the amendment of my hon. Friend the Member for Ashfield is accepted, as I hope it will be, an earlier date—they meet their obligations and give the money back to the people who are funding it in the first place?

Photo of Rory Stewart Rory Stewart The Minister of State, Ministry of Justice

It is a great honour to serve under your chairmanship, Sir Henry. I am grateful to right hon. and hon. Members for bringing proposing the amendments and new clauses.

Effectively, as the right hon. Member for Delyn has pointed out, new clause 2 was introduced with a lot of influence from the House of Lords—it was driven by Opposition Members of the House of Lords to meet exactly the concerns raised by right hon. and hon. Members. Therefore, I am tempted to argue in my brief argument that amendment 17 and new clause 6 are, in fact, unnecessary. The noble Lords did a good job in new clause 2 of addressing many of the concerns raised in the debate, which is why the Government are keen to ask for the Committee’s support.

At the heart of this, the Committee will discover, is a fundamental disagreement about the nature of markets, which will be difficult to resolve simply through legislation. There are profoundly different views on both sides of the House about what exactly is going on in a market. Again and again, all the arguments—from Mr Hepburn right the way through to the eloquent speech by the right hon. Member for Delyn—rest on the fundamental assumption that every company, insurance or otherwise, in the country is simply involved in trying to charge their consumers as much as possible and provide as few services as possible, and that there is nothing to prevent their doing that.

Of course, what prevents companies from doing that ought to be competition. It does not matter whether that is the insurance industry or, to take a more straightforward question, why Tesco’s does not charge £50 for a loaf of bread and try to produce one slice. In the end, the decision on what premiums are charged will be driven by competition between different insurance companies. All the arguments, whether in relation to these or other amendments, are based on that fundamental misunderstanding. The Labour party is again effectively pushing for a prices and incomes policy. They are trying to get the Government to fix the prices of premiums and control the prices that insurance companies charge because they simply do not trust the Competition and Markets Authority, the FCA, the insurance industry or any other business to pass on savings to consumers.

Photo of David Hanson David Hanson Llafur, Delyn

With respect to the Minister, in this case the Labour party is just asking for confirmation of what the Government want to do. They said that they want to save £1.3 billion, and in November 2015 said that they would give back £50 as premiums. That figure has changed. All I am asking is this: what is their estimate of the figure today? The Minister should be able to give an estimate because he has done so on two previous occasions—in an assessment of the Bill’s financial implications in the Conservative party manifesto, and in the Chancellor’s statement to the House of Commons.

Photo of Rory Stewart Rory Stewart The Minister of State, Ministry of Justice

Unfortunately, something is being missed in the way the right hon. Gentleman is framing his arguments. He is suggesting that there is a fixed, stable situation—the Chancellor of the Exchequer offered £50, nothing changed, and now it is £35. If that were true, it would indeed be a disgrace, but the reality is that, following the negotiations that took place in the consultation and in the House of Lords, the savings that the insurance companies will realise and will be in a position to pass on to the man or woman paying the premium have been considerably reduced.

When the Chancellor of the Exchequer—[Interruption.] The right hon. Gentleman might be interested in listening to the answer rather than talking to somebody else. When the Chancellor of the Exchequer spoke, he of course suggested that all general damages would be entirely removed. His proposal was that there would be no general damages at all. It is therefore perfectly reasonable. If no general damages at all were paid, the insurance company’s savings would be considerably larger, and the savings passed on to the consumer might indeed have been £50.

Due to the very good work that the Opposition and the noble Lords put in, there have been a number of compromises to the Bill, which mean that the savings passed on to the insurers, and from the insurers in the form of premiums, will be considerably reduced. One of those compromises is that, whereas in the past there were going to be no general damages paid to anybody getting a whiplash injury of under two years, there is now a tariff for money to be paid out. As it gets closer to two years, the tariffs paid out will be much closer to the existing Judicial College guidelines, so the savings will be considerably less.

Photo of Bambos Charalambous Bambos Charalambous Llafur, Enfield, Southgate

We have been here before with the Domestic Gas and Electricity (Tariff Cap) Act 2018, in which the Government fixed the energy price cap and said that the big energy companies would give money back to the consumers, even though the money is not as high as we expected. Then it was £100, and now it is about £70. Why does the Minister not want to do that with insurance companies?

Photo of Rory Stewart Rory Stewart The Minister of State, Ministry of Justice

That is a very good question. The hon. Gentleman and the right hon. Member for Delyn are essentially asking the same question. Indeed, that is what this whole debate is about. The question is about the extent to which the Government wish to interfere in the market to fix prices. As the hon. Member for Enfield, Southgate suggested, a very, very unusual and unprecedented decision was made about the energy companies following a suggestion originally made by the Labour party that we should get involved in fixing prices. That is something about which, from a policy point of view, we generally disagree with Labour because—this deep ideological division between our two parties goes back nearly 100 years—we are a party that fundamentally trusts the market.

The Financial Conduct Authority and the Competition and Markets Authority argue that the insurance companies are operating in a highly competitive market. The reason why we did not initially suggest that we need to introduce anything equivalent to new clause 2 is precisely that we believe that the market is operating well, and that the savings passed on to the insurance companies will be passed on to the consumers, as happens in every other aspect of the market. I have not yet heard a strong argument from the Opposition about why they believe that not to be the case. Logically, Opposition Members can be making only one argument: they must somehow be implying that the insurance companies are operating in an illegal cartel.

Photo of Rory Stewart Rory Stewart The Minister of State, Ministry of Justice

I give way to hear why the Opposition believe that is not the case.

Photo of Jo Stevens Jo Stevens Llafur, Canol Caerdydd

The Minister has said that the Opposition want to fix the market and prices. He also mentioned trust, which is exactly what this is about, because we have been in this situation before. Previously, insurers promised to return savings to consumers and did not. Why is it different this time? Why does the Minister think we can take insurers at their word this time when they have not returned savings previously?

Photo of Rory Stewart Rory Stewart The Minister of State, Ministry of Justice

Recent evidence on the cost of motor premiums shows that, after the implementation of the last set of reforms, there was a flattening off in the increase in the insurance premiums that was lower than inflation. The reason we believe this mechanism works—this was all part of the evidence put forward by the Competition and Markets Authority—is that it is a very mobile market. Currently, 72% of policyholders have switched their motor insurance provider—it is not a static market where people do not move between providers, which gives a very strong incentive to compete on the premiums. Fifty per cent. of insurance customers are going to comparison websites to compare the premium prices.

That is part of the reason why we believe insurers will pass on the savings to consumers. However, we concede that there is an issue of trust—from the public, the Opposition and the House of Lords—which is why we believe we have come forward with the correct new clause 2, which will allow right hon. and hon. Members on both sides of the House to hold the insurers to account. In the very detailed amendment put forward by the Government, which the right hon. Member for Delyn suggested was too detailed, we have specified all the information we expect insurers to provide, so that we are in a position to work out exactly what savings they derive. That will allow the Treasury, working with the Financial Conduct Authority, to come to a view on whether insurers are passing on the savings to the customers.

The right hon. Member for Delyn asked what the point is of the new clause and why we do not propose a compulsory mechanism to pass savings on. The answer is that it all depends on competition and market law. If at the end of the reporting period there is clear evidence that the companies have significantly increased their revenues without passing on savings to customers, that will raise very considerable questions about the operations of markets and competition. That may indeed imply, as Opposition Members seem to imply, that some form of legal cartel is in operation. At the moment, there is no evidence that that is happening.

Photo of Gloria De Piero Gloria De Piero Shadow Minister (Justice) 2:30, 11 Medi 2018

Does the Minister accept that, since the changes made in 2012, insurance companies have saved £11 billion?

Photo of Rory Stewart Rory Stewart The Minister of State, Ministry of Justice

I am not in a position to accept or reject that figure—I am not familiar with that figure and I am not clear how it has been arrived at. I am happy to look at that in more detail before Report stage of the Bill.

Photo of Craig Tracey Craig Tracey Ceidwadwyr, North Warwickshire

The Minister mentioned the reforms of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, but is it not right that, in the two years following those reforms, insurers passed on £1.1 billion of savings, and that average premiums dropped by £50?

Photo of Rory Stewart Rory Stewart The Minister of State, Ministry of Justice

Again, the Competition and Markets Authority is our best guide. Its job is to look very closely at the operations of its industry. It believes that this is a very competitive industry, which is why it is confident that the reforms introduced led to savings that were passed on to customers and why it believes that the current reforms will lead to the same. If that does not happen, it would be interesting to hear Labour Members’ theories about why competition is not operating in this market and why they believe there is a cartel. If that is the argument they wish to make, they will be assisted and not impeded by the Government new clause, which will enable them to gather the information with the Treasury and the Financial Conduct Authority in order to make precisely that case.

Photo of Jo Stevens Jo Stevens Llafur, Canol Caerdydd

Perhaps I can help the Minister on the figure that my hon. Friend the Member for Ashfield mentioned—the £11 billion of savings after the 2012 changes. That is an Association of British Insurers figure. That figure was saved in claims costs over six years, according to its evidence, but premiums are now higher than ever.

Photo of Rory Stewart Rory Stewart The Minister of State, Ministry of Justice

I will return to the fundamental disagreement between right hon. and hon. Members. We can all agree that there were significant savings to the insurance industry. We can all agree that some of those savings were passed on to customers and that premiums ceased to rise at the rate at which they had been. There is some disagreement between the two sides of the House about whether enough of those savings were passed on—we argue that the industry passed on sufficient savings—and whether premiums went up more than they should. However, without Government new clause 2, the evidence or information will not be available to people in order to make such arguments.

It is not enough to produce a general figure, saying, “Here is £11 billion, and this is how much was passed on in premiums.” That is why the new clause has no less than 11 subsections that detail the kind of data that would need to be extracted from the insurance industry by the date recommended in order to prove that case. I was asked why reporting would not be done annually. The answer, of course, is that a claim can be brought any time within three years of an accident. The date takes into account that the law is due to come into effect in 2020. We add three years to that for the claim, and then time for the data and evidence gathering in order to report in 2024.

Photo of David Hanson David Hanson Llafur, Delyn

If the Bill comes into effect in 2020 and we add three years, that is 2023. However, new clause 2(7) says:

“Before the end of a period of one year beginning with 1 April 2024”.

That means that the report may not be done until the end of March or April 2025. It may be published by the Government after that, and then there will be discussion. Therefore, even on the Minister’s timetable, we are talking about three years past the 2023 deadline that he indicated to the Committee a moment ago. He should reflect on that and table an amendment to his new clause on Report that brings forward the proposed date considerably.

Photo of Rory Stewart Rory Stewart The Minister of State, Ministry of Justice

The reason why I respectfully request that the Government amendments are supported and the Opposition amendments are withdrawn is that pushing for one-year rather than three-year reviews and attempting to price fix the result would leave the opposition amendments open to judicial review and create an enormous, unnecessary burden on the market. Our contention is that the market already operates—we have the Competition and Markets Authority to argue that that is the case—and, by introducing our new clause, we will be able to demonstrate that over time. It is a very serious thing.

I remain confident that, if insurance companies are compelled to produce such a degree of detail and information to the Financial Conduct Authority and the Treasury, they will pass on those savings to consumers because, were they not to, they would be taking a considerable legal risk. The industry initially resisted this move, and understands that it is a serious obligation.

Photo of Ruth George Ruth George Llafur, High Peak

As the Minister said, the insurance companies have said that they will pass savings on to consumers, and the Government have been actively engaged in trying to ensure that all insurance companies sign up to a pledge to reduce premiums, which in itself is a way of fixing the market. However, if it will take insurance companies seven years from now to produce the information, from what date will premiums be reduced? When will consumers see payback from the policy?

Photo of Rory Stewart Rory Stewart The Minister of State, Ministry of Justice

We would expect, because of the nature of competition, for premiums to begin to reduce soon—almost immediately—as insurance companies anticipate the nature of the changes and move to drop premiums to compete with each other and attract new customers. In fact, following legislation in 2012, premiums dropped from £442 in 2012 to £388 in 2015.

Photo of Ruth George Ruth George Llafur, High Peak

If the Minister expects premiums to drop so soon, why can the Government not report to the House on those premiums dropping?

Photo of Rory Stewart Rory Stewart The Minister of State, Ministry of Justice

The premiums dropping will be assessed and published in the normal fashion. The requirement in new clause 2 is much more complex. The new clause requires a prodigious amount of information about all forms of income streams, the number of claims and the number of premium holders so the Treasury and the Financial Conduct Authority can develop a sophisticated and detailed picture in order accurately to address the concerns of Opposition Members that, over the period—particularly the three-year period that will be affected by the introduction of the Bill—insurance companies will not pass on savings to consumers. We believe they will, which is why we are comfortable pushing for this unprecedented step of gathering that information to demonstrate that the market works.

On that basis, I politely request that the Opposition withdraw their amendments and support Government new clause 2, which after all was brought together by Opposition Members of the House of Lords and others, and which achieves exactly the objectives that the Opposition have set out.

Photo of Gloria De Piero Gloria De Piero Shadow Minister (Justice)

The Minister talked a lot about where the Committee disagrees, but there are things we can all accept as fact—the facts that insurance profits are up massively and that these changes will save insurance companies £1.3 billion, for instance—and we all want premiums to come down. We believe only amendment 17 and new clause 6 will deliver that, so we seek to divide the Committee.

Question put, That the amendment be made.

The Committee divided:

Ayes 8, Noes 9.

Rhif adran 13 Caledonian Pinewood Forest — Regulation by the Financial Conduct Authority

Ie: 8 MPs

Na: 9 MPs

Ie: A-Z fesul cyfenw

Na: A-Z fesul cyfenw

Question accordingly negatived.

Clause 8 ordered to stand part of the Bill.

Clause 9 ordered to stand part of the Bill.

Clause 10