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Lord Davies of Oldham: My Lords, I am grateful to both noble Lords for their participation in this brief debate and for their kind welcome to what feels at the moment like a baptism of fire. In the past, I have been responsible for one or two orders that have not been quite as controversial and subject to challenge as those now before us. I am also mindful of what the noble Lord, Lord Hunt, referred to as a history of participation in these issues. It is a long record of real achievement on the part of the two Opposition spokespersons, while I come as an ingenue to the debates. However, I shall do my best to respond to the particular points that have been raised.
I turn, first, to the issue which has been presented most forcefully and on which the greatest anxieties were expressed; that of travel insurance. I had hoped to deflect those concerns in my opening remarks, but it appears that I met with a conspicuous lack of success. Now I must address them in rather more precise terms.
I do not consider the question of cost-benefit analyses in quite the terms expressed by the noble Lord, Lord Hunt. It is the case that something like 18 to 20 million travel insurance policies are sold each year. For the year ending April 2002, some 884 complaints were received. Of course, any complaint may be a pointer towards abuse and certainly suggests mishap, enormous inconvenience and detriment to the consumer involved. However, that figure indicates the measure of the issue and it will be recognised that, under the present statutory provisions, it is not possible to bring this tidily under the remit of the Financial Services Authority. Therefore there is good reason for further consideration of the issue. Once again representations made elsewhere have been presented with considerable force in the House and I respect those contributions.
As to the issue of regulation generally, the noble Lord, Lord Hunt, is uncharacteristically pessimistic about British potential and British achievements in stressing that regulation and complying with the European directive ought not to be a high priority in an area where the industry has had limited impact across frontiers in the past. That is certainly so, but we all recognise the speed at which we are moving into a new age. Modern technology facilitates transfers and arrangements in a much more felicitous way than in the past and there ought to be legislative provision to guarantee that those who sell insurance in Britain are in a fully competitive position across Europe.
We all know that this is a part of the drive towards the single market. It is one area where, because of its unique features, the industry lags a long way behind other industries. It is surely right that we should set in place a system of regulation which encourages our
Lord Hunt of Wirral: My Lords, I know that I am looking back, but my point is that we had in this country a system of self-regulation, particularly through the General Insurance Standards Council, which was envied throughout the rest of Europe. It is very sad that we are now moving towards statutory regulation.
Lord Davies of Oldham: My Lords, I hear what the noble Lord says and I recognise the value of the previous system of regulation. Although much admired, that does not mean to say that it meets the requirements of the new European single market. The new regulations clearly do.
I listened with great interest to what the noble Lord, Lord Sharman, said about the home reversion market. He is right; it is a growing market and there is a substantial amount of money involved. He is also right to point out that it affects the more vulnerable members of the community rather than conventional consumers because they tend to be elderly and, therefore, potentially more vulnerable.
He made the straightforward point that if we had total regulation against any conceivable ill, we would all be saferbut we would be paying a considerable price. The Government's case must be sustained. We recognise that it is a growing market on which we need to keep a close eye. There is a potential for abuse although we have not got evidence of widespread difficulties at the present time. I earlier gave an assurance that we intend to review the position and implement regulation if that unhappily proves to be necessary. I am conscious that, as ever with these issues, a measure of judgment is involved.
Another aspect of the cost benefit analysis is that it recognises that the travel industry has fallen on difficult times in the past couple of years. It goes without saying that there has been an enormous drop in the American market and that there are other difficulties.
Smaller travel agents seem to work on very tight margins indeed. A recent survey carried out by PriceWaterhouseCoopers indicates that they are operating on about 1.15 per cent of turnover. Therefore, additional costs of insurance, with regulation, would trim very tight profit margins. It is one of those industries which ranges from very substantial companies to a large number of small companies operating on very tight margins.
It is a question of striking a balance between the inevitable and proper protection that the consumer merits and ensuring that the industry is able to pursue its objectives and provide the service that it does.
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