House of Commons Hansard Debates for 30 Jan 1997 (pt 22)

7.51 pm

The Minister for Competition and Consumer Affairs (Mr. John M. Taylor): I congratulate my right hon. Friend the Member for Selby (Mr. Alison) on securing this debate. I welcome the opportunity it provides to discuss the issue of insurance cover for properties in areas exposed to the risk of coal mining subsidence damage. As he said, it is an issue that potentially affects large numbers of homes in his constituency and elsewhere.

I am aware that my right hon. Friend has had previous correspondence and discussions on this matter with my hon. Friend the Minister for Small Business, Industry and Energy. I am therefore aware of the difficulties faced by some of his constituents while trying to obtain insurance cover for their homes. My right hon. Friend drew attention to the extensive safeguards provided by the statutory coal mining subsidence regime.

The relevant legislation is the Coal Mining Subsidence Act 1991, as amended by the Coal Industry Act 1994. In essence, the Act requires coal mining companies in areas of current mining and the Coal Authority elsewhere to make good coal mining subsidence damage. Given that statutory regime, like my right hon. Friend I find it difficult to understand why insurers should be concerned about the possibility of receiving claims for coal mining subsidence damage when that damage would be made good by the coal mining company or the Coal Authority.

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My right hon. Friend was kind enough to refer to my hon. Friend's initiative in meeting the Association of British Insurers, when he put that proposition to them. It was clear that there was widespread--if not universal--recognition, at least in the association and at insurers' head office level, that the regime was in place and that the cost of coal mining subsidence damage repairs would not fall on the insurer.

Nevertheless, the association offered--I believe it was a helpful suggestion--to hold a seminar for its members with the Coal Authority and with RJB Mining to make clear the full extent of the coal mining subsidence damage regime and its implications for insurers. That seminar was held in October last year and was well attended. I am sure that the insurance industry, certainly at head office level, is now much more fully aware of how unlikely it is that it would be called upon to meet coal mining subsidence damage claims. That appears to be useful progress.

Meanwhile, my right hon. Friend recently received a letter from the Association of British Insurers. He will know from the letter that the association accepts that some insurers had been reluctant to quote for risks in coal mining areas because they failed to understand the responsibilities of the mining companies and the Coal Authority. My right hon. Friend will have noted that, in order to improve the situation, the association has requested the chief executives of member companies to

"ensure consistent application of an informed underwriting policy of generally being prepared to insure such policies".

I turn now to the so-called "direct" insurance market. As my right hon. Friend is aware, those companies offer lower premiums. They are able to do that, essentially, by taking on only applications that give rise to no substantial underwriting complications, thereby enabling them to reduce their administration costs. Insurers are commercial undertakings. I am confident that my right hon. Friend will agree that, if some insurers decide that they shall seek to supply a particular segment of the market in that way, they are fully entitled to do so.

Much of the continuing confusion about the matter is due to a lack of understanding of company underwriting policy at branch level. While the head office of a particular company may be well informed of the risks and of how customers should be advised, staff at branch level often remain uninformed. A similar situation can arise with independent brokers, where companies have not kept them up to date with any changes to their underwriting policies.

The Association of British Insurers has been positive in contacting its members to ask that each company ensures that its underwriting practices are consistent across its regional offices. The association highlighted the need for companies to put in place procedures for referring customers from direct writing arms of their business to other parts of the company that can handle that specialised business.

I understand that steps are being taken to compile an information pack to ensure that all direct insurers give consistent advice about why they have to refuse some applicants, and that they pass applicants on to "non-direct" parts of the business, which will consider more complex applications. A pack is also being

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