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13 Jan 2010 : Column 255WH—continued
One thing that has struck me forcibly in this debate is that many people have referred to China's growing power and the possibility of a bipolar world in which the United States of America and China are the two world powers. To me, that points clearly not just to the
role of the G20 and so on but to our role within the European Union. One frustration for the Chinese is that they end up doing different deals with 27 countries within the EU and that Europe cannot manage to get its act together effectively in its relations with China. We can be much more effective on many issues by having a shared foreign policy within the European Union in relation to China.
The hon. Member for Mid-Norfolk said that it is sometimes difficult to say things in public because it offends Chinese sensibilities. I am sure that he was not suggesting that we therefore should not say them.
Chris Bryant: I understand that. However, it is often easier for us to say things jointly, as the whole European Union. That has far more effect without affecting bilateral relations directly. In relation to some of the issues that we have discussed today, the fact that the EU has been able to engage concretely as a whole, making representations on our behalf as well as on that of other member states, has mitigated some potential problems with bilateral relationships.
The creation of a much more rationalised External Action Service within the European Union and its presence in China will be vital to UK interests in the years to come. We must ensure that good British diplomats are deployed in the External Action Service in China, and we must ensure that the EAS is effective. Given how Cathy Ashton presented her case to the European Parliament on Monday, I am sure that she is focused on that.
We need to address crucial international affairs issues, such as Iran's growing nuclear ambitions, and China will be key to that. Several hon. Members referred to trade issues. One area in which we need to move forward significantly is achieving market economy status within the European Union for China. That can happen only when China is prepared to make effective concessions on some of its anti-competitive practices.
The hon. Member for Banbury started by referring to Copenhagen. Several hon. Members, including my hon. Friend the Member for Sittingbourne and Sheppey (Derek Wyatt), suggested that there might have been a complete failure on the British part and that we somehow did not know what the Chinese were thinking. We certainly did. On many occasions last year, Ministers here expressed our profound concern about the direction in which China was moving in relation to climate change. Many of us tried to put the argument to China that the threat to it from climate change is significant in terms of internal migration and migration from low-lying areas around the world, and that it is in China's interest to get it right.
The hon. Member for Mid-Norfolk said that ambassadors sometimes do not have much wriggle room; that is also true of Chinese delegations. Perhaps if there had been more wriggle room in Copenhagen, we would have got closer to a better and stronger set of agreements. I know that many more vulnerable nations were upset that the equity argument about climate change-namely, that the poorest people in the world will be most dramatically affected by it, whether in Bangladesh or on islands in the Pacific that are likely to disappear under the ocean-did not carry as much weight with
China as it perhaps should have done, especially in light of the argument that China wants a harmonious world according to its own understanding.
We look forward to Mexico and hope that we will be able to secure a better agreement. I am convinced that the Chinese position will move; I am sure that the equity argument will carry more weight. It was good that China moved substantially last year from the position that it held at the beginning of the year to the position that it adopted in Copenhagen. It was a significant change. China now accepts the need for measurement and verification.
Several hon. Members asked whether we have the right architecture for such discussions. That is almost certainly not the case; the difficulty is whether we should first address the architecture arguments or the substance. That is one complication of all United Nations bodies. We need to find an architecture that better embraces the changing power blocs that several hon. Members have mentioned, not least Brazil, India and Mexico.
The hon. Member for Mid-Norfolk discussed the execution of Akmal Shaikh, and the hon. Member for East Dunbartonshire (Jo Swinson) referred to her hon. Friend the Member. for Orkney and Shetland (Mr. Carmichael), who has done a great deal of work on the issue of the death penalty around the world. We debated the issue before Christmas-I answered for the Government. He has said, I think, that we did everything that we thought possible. The Prime Minister, the Foreign Secretary and I, as well as the embassy in Beijing, did everything that we could to ensure that our concerns about the nature of the trial, the secrecy that surrounded it and the issues relating to mental health were understood. It is worth saying that mental health is viewed very
differently in China and that the amount of drugs involved was 80 times the amount that would normally lead to an execution there.
We wholeheartedly deprecate the use of the death penalty in any country. The fact that China, and Chinese public opinion, has a completely different attitude towards such matters is undoubtedly a problem for us. We understand the family's need for a proper sense of closure, and we will respond in a way that I hope can provide it; I am not yet sure precisely how we will go about it.
The hon. Member for Banbury mentioned the number of Chinese students who come to the UK. My hon. Friend the Member for Sittingbourne and Sheppey-incidentally, I should say that it is also a great sadness that he will not be here after the general election either, as he will not be standing; I have had the great pleasure of rowing and agreeing with him over the years-mentioned soft diplomacy. The number of Chinese students who come to the UK is an important part of that, which is why I would not change the student visa regime in the way suggested by the Conservative party. The more Chinese students who come to the UK, the better. In relation to soft diplomacy, the BBC World Service, the British Council and the Chevening scholarships are all important elements of how we do business around the world.
Several hon. Members raised the issue of dissidents being treated aggressively by the Chinese courts recently. We wholeheartedly deprecate and are concerned by the verdict and sentence pronounced against the prominent human rights defender Liu Xiaobo. It is the most substantial sentence given for many years-
Christopher Fraser (in the Chair): Order. We now move on to the next debate.
Insurance Industry
11 am
Mr. Tom Harris (Glasgow, South) (Lab): I am grateful for the opportunity to address the Chamber on this important issue, Mr. Fraser.
Although this debate is on the regulation of the insurance industry, my aim is not to discuss the subject in its broadest terms, but to focus on a specific issue as it affects one of my constituents. Paul McGaw's health insurer refused to provide a payout under a critical illness scheme for a medical condition covered by the policy. I hope that bringing this issue to the Government's attention will encourage them to reconsider the system of regulation of the insurance industry.
Mr. McGaw was an employee of Sopra Newell and Budge, an IT company based in Edinburgh. In June 2003, the company instituted a group critical illness scheme with AEGON UK, which was open to all employees. Mr. McGaw applied to join the scheme in June 2005 and his cover commenced on 1 July 2005. At the time of application, no comprehensive details of exclusions were made available to Mr. McGaw, nor was there a key facts summary. Applicants to the scheme were required only to complete a fairly basic tick-list questionnaire, which Mr. McGaw duly did.
Nearly two years after his policy cover started and following a number of medical tests, Mr. McGaw was diagnosed with multiple sclerosis by his general practitioner. That condition was covered by his policy. Understandably, he made a claim under the terms of the policy through his employer. The claim was examined by AEGON UK, which requested his previous medical records so that they could be looked at by its appointed medical adviser.
On 27 September 2007, Mr. McGaw was informed that his claim had been rejected on the grounds of paragraph 10.2 of the policy conditions:
"No benefit will be payable for any Critical Illness condition occurring within two years of the Member's cover starting which, in the opinion of the medical advisor nominated by us, has resulted directly or indirectly from any condition that the member was known to be suffering from at, or prior to, the start of Cover."
AEGON UK wholly accepted that Mr. McGaw was suffering from MS, but based on his medical records, claimed that he was known to be suffering from a pre-existing condition prior to the commencement of the policy. That related to the diagnosis of an eye condition three years earlier.
In 2004, Mr. McGaw had experienced a number of problems with his vision. He had been examined by his GP and a consultant ophthalmologist. The consultant wrote to the GP confirming a diagnosis of retrobulbar neuritis and stating that Mr. McGaw's vision had returned to normal. It is important to make it clear that at no time was Mr. McGaw advised that the diagnosis suggested other more serious neurological problems. Even in his medical notes, there was no suggestion of possible or suspected MS at that time.
The insurance provider took issue with Mr. McGaw's diagnosis of retrobulbar neuritis, saying it was a possible indicator of MS. I should point out that it is not a cause of MS. Mr. McGaw's consultant has confirmed that more than half of those diagnosed with the eye condition
do not go on to develop MS. Given that Mr. McGaw was not referred for any further tests in November 2004, it is difficult to argue that he was known to be suffering from a relevant condition when he joined the critical illness scheme, or that any of his medical advisers suspected that he was suffering from MS. Nevertheless, AEGON UK refused the payment on those grounds.
In April 2008, Mr. McGaw appealed the decision to refuse payment, but that was rejected. Later that month, he appealed to the financial services ombudsman who, after considerable delay, rejected the appeal. The FSO accepted that Mr. McGaw had fallen foul of the two-year rule and that the diagnosis of retrobulbar neuritis was a relevant pre-existing condition.
Mr. McGaw approached me as his Member of Parliament in April 2009. I wrote to Mr. Otto Thoresen, chief executive of AEGON UK, raising a number of concerns and asking for the case to be reconsidered. Mr. Thoresen declined to reconsider the decision and rehearsed in detail the argument about a known pre-existing condition. The letter emphasised that, under a group policy, no underwriting work is carried out before cover is granted. Had underwriting taken place in June 2005, MS would have been specifically excluded from Mr. McGaw's cover, given his known medical history. I find that incomprehensible, given that Mr. McGaw's consultant has confirmed that retrobulbar neuritis is not a cause of MS.
Having exhausted every other avenue, the only method of appeal open to Mr. McGaw is the civil court. That option is prohibitively expensive and carries no guarantee of success. There is case law in regard to a personal, rather than group, policy in which an insurer's decision to reject a similar claim was overturned. In that case, which came before Lord Eassie, a pre-existing eye problem and subsequent diagnosis of MS were again the matters under dispute. In finding for the plaintiff, Lord Eassie ruled that the insurer requested access to her medical records only to avoid payment, as it did not dispute the diagnosis.
Under a personal policy, insurers are required to allow for three types of non-disclosure: innocent non-disclosure, as in the court case I have just described, where full payment must be made; negligent non-disclosure, where partial payment is made; and deliberate non-disclosure where no payment is made. It is clear that under a personal policy, Mr. McGaw would have been entitled to at least partial payment, if not full payment. Sadly, my constituent appears to be a victim of the very different terms and conditions that pertain to group policies and personal policies.
Throughout the UK, employers offer group policies as part of their package of employee benefits and thousands of individuals take up the opportunity in good faith. They assume that they are gaining, at some considerable saving, the sort of cover and security for themselves and their families that would alternatively be obtained only by taking out a personal policy. I am less than convinced that in promoting such group policies, insurers make it sufficiently clear that the cover members will enjoy is significantly lower than the member might assume. Mr. McGaw is a reasonable and intelligent individual, but at no point did he realise that the policy would not provide him with the assumed cover until his claim was refused.
I trust that the Minister will agree that those who believe themselves to be covered by such group policies should seek further independent advice to confirm exactly what they are covered for. Having acquainted myself with Mr. McGaw's case, my concern is that thousands of employees in this country who think that they are covered for critical illness, would be put in an intolerable financial position, along with their families, if such an illness arrived. I have come to the unfortunate conclusion that AEGON UK has, through its dubious and cynical processes, severely let down my constituent in a most tragic, callous and unforgivable way.
11.8 am
The Exchequer Secretary to the Treasury (Sarah McCarthy-Fry): It is a pleasure to serve under your chairmanship, Mr. Fraser. I thank my hon. Friend for securing this debate.
The regulation of the insurance industry is an extremely important issue and I listened with interest to my hon. Friend's speech. I was saddened to hear the case of his constituent, Mr. Paul McGaw, in relation to both his suffering from multiple sclerosis and his inability to claim on his critical illness policy. I am sure my hon. Friend will appreciate that I cannot comment on that individual case today, but I will provide an overview of how the insurance industry is regulated and describe recent improvements to the protection of insurance customers. I will cover critical illness insurance and group critical illness insurance in particular. I will go on to mention recent and proposed improvements to insurance industry regulation. I will focus in particular on the proposed Law Commission reforms.
There have been a number of improvements in consumer protection and regulation for insurance before and after Mr. McGaw's claim in 2007. I recognise that that knowledge will not alter his situation or offer him much comfort. However, it is important that we highlight the excellent work that has been done to improve insurance regulation in recent years.
My hon. Friend will understand that many decisions about the regulation of the insurance industry, especially in relation to consumer protection, are made by bodies specifically established to act independently of Government. The Financial Services Authority is the lead regulator for the insurance industry, and the Competition Commission and the Office of Fair Trading have important roles in ensuring that insurance markets do not function in a way that leads to consumer detriment.
The Financial Ombudsman Service acts as an independent and impartial dispute resolution service and provides a safety net for consumers with complaints against financial services firms, and I am glad that Mr. McGaw sought its opinion on his case. By their nature, financial services, including insurance, often create complex consumer issues. The FOS provides an economical and accessible resolution service to determine what is fair and reasonable on the basis of the facts of the dispute.
It is important that regulators maintain confidence in the insurance sector because the efficient transfer of risk through insurance is an important social function. It allows people to get on with their lives without having to worry about risks that they are unwilling or unable to bear. By paying out hundreds of millions of pounds per day in claims, this crucial industry provides a service to society and individuals when they are in distress.
However, as recent cases involving payment protection insurance and mortgage payment protection insurance have highlighted, poor sales and administration practices can lead to unfavourable consumer outcomes. That is why it is as important as ever that we ensure that a robust supervisory regime is maintained and improved in order to protect consumers while at the same time allowing the industry to continue to innovate and grow.
We as a Government are committed to working with the regulators and the insurance industry to continue to improve consumer outcomes. That aim was restated in last year's report of the insurance industry working group, which was co-chaired by the Chancellor and Andrew Moss, the chief executive officer of Aviva. Made up of leading industry figures, the group set out its vision for the insurance industry in 2020, stating that it wanted the UK to be the leading global centre of excellence for insurance, and recognising that better consumer outcomes were fundamental to achieving that vision.
In recent years, we have collectively delivered several significant improvements to consumer protection and wider social outcomes. The FSA, OFT and Competition Commission have worked to improve the quality and distribution of payment protection insurance products, which are known as PPI policies. The FSA agreed an end to the sale of single-premium PPI policies in May last year and imposed substantial fines for mis-selling PPIs. It is also consulting on new guidance detailing how companies should process PPI complaints, and requiring firms to reopen 185,000 PPI complaint cases.
The FOS continued to help to protect PPI consumers by offering independent arbitration. Furthermore, the Government have introduced equalities legislation that will prohibit unjustified discrimination in the provision of goods, facilities and services.
To move on to critical illness insurance products, critical illness cover provides a lump sum in the event that the policyholder suffers from a specified illness or undergoes a specified operation. In 2008, more than 50 families and individuals a day were helped at extremely difficult times in their lives by claiming on their critical illness insurance policies. The average claim was £63,000, which is more than double the average UK annual salary. Currently, some 12 million people in the UK are protected by a critical illness policy.
Critical illness policies will pay out if the policyholder suffers from one of a list of predefined illnesses rather than from any condition that could prevent an individual from working. Typically, such policies will also not cover pre-existing illnesses if symptoms had started to develop, or conditions that develop within a relatively short period of cover being taken out.
For group critical illness cover, the employer takes out a policy for the benefit of the members of the group scheme. However, the individual members are not party to the insurance policy. In group insurance, it is common for individuals to be asked relatively few underwriting questions up front and for the insurer to mitigate the risk of having less information through exclusions. That approach is taken because it is cheaper and easier to run, which means that policies can be offered at more affordable prices. It is not unique to group policies; other insurance products-for example, several individual travel insurance policies-also take that underwriting approach.
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