Baroness Hoey (Non-Afl)

My Lords, this amendment follows on from the amendment tabled in Committee by the noble Lord, Lord Hunt of Wirral. I am bringing the House’s attention to a growing and deeply concerning problem in Northern Ireland’s insurance market. The market is shrinking in insurer capacity, it is becoming less competitive, and it is leaving consumers and businesses facing higher premiums and fewer choices. It is an issue that the British Insurance Brokers’ Association has been highlighting for some time, and about which it has been getting in touch with noble Lords and Members in the other place. The evidence suggests that the root cause is claims inflation driven by various factors that are within the power of government and regulators to address. Let me be clear to noble Lords, especially to the Minister: I am not calling for a new, immediate regulatory regime without proper consultation. Rather, the amendment would provide the Treasury with a targeted enabling power, subject to consultation and affirmative parliamentary approval, to extend FCA regulation of claims management companies to Northern Ireland. They are, of course, currently regulated in Great Britain by the FCA. I will give a brief backdrop to the amendment, which paints a very stark picture. In home insurance, brokers in Northern Ireland now have access to just six markets, down from 11 in 2020. In motor insurance, the number of available providers has fallen from more than 15 to just eight over the same period. As competition has reduced, premiums in Northern Ireland have continued to rise, even as prices in Great Britain have begun to stabilise or fall. In motor insurance, Northern Ireland consumers are being affected by premiums increasing year on year, and they are already paying much higher premiums compared with the rest of the UK. Of course, as noble Lords will know, access to public transport in Northern Ireland’s extensive rural areas is very limited. Therefore, there is no regulation of claims management companies in Northern Ireland. This has led to many of them exercising poor practices, which in turn leads to inflated claims settlements and therefore higher premiums for consumers and businesses. As fewer insurers have a physical claims-handling presence in Northern Ireland, so the prevalence of CMCs has become more apparent. The number of CMCs has grown rapidly. We estimate that there are probably twice the number operating than a year ago, suggesting that it is a very lucrative enterprise. Adverts appear everywhere, pointing people to them if they have a car accident, et cetera. Of course, in GB, since the regulation came in, the number of CMCs operating has halved since 2019. Another reason for the growth of CMCs is their attraction of higher personal injury awards in Northern Ireland, which makes it a lot more lucrative for them. The difference between Northern Ireland and England and Wales is striking. For whiplash, for example, in England and Wales a compensation of around £1,500 would be paid. In Northern Ireland, it could be up to £15,000 with psychological claims added on. Obviously, those higher awards feed directly into higher insurance premiums for consumers and businesses alike. In some cases, we see clear conflicts of interest. Vehicle hire, legal services and CMCs are brought together under the same commercial structure, creating clear conflicts of interest, with some CMCs operating various companies under different names but with the same overall ownership. Ultimately, these additional costs are paid by consumers through higher premiums. As we all know, insurance is not a luxury; it is essential. It must be accessible and affordable for all. It is very unfair that we in Northern Ireland are paying a higher premium compared to those in Great Britain. The consequences of no regulation at all of CMCs are becoming increasingly clear. Major insurers have already withdrawn from Northern Ireland and new entrants are refusing to come. Some insurers are refusing to insure young drivers at any cost, and some insurers are refusing to cover certain postcodes where there is a high prevalence of CMCs and perhaps more perceived evidence of collusion. One insurer has reportedly reduced its Northern Ireland motor business by 75% and customers of a major broker have seen their premiums rise by 45% between 2023 and 2026. All this, of course, could lead to market failure. Northern Ireland consumers deserve access to affordable, fair and competitive insurances. To achieve that, we will need co-ordinated action from the Northern Ireland Executive, the Treasury, Westminster, regulators and industry alike. We have to work together to make this happen. Everyone agrees that there is a problem and now we have to fix it. The issue has become quite a political hot potato in Northern Ireland, because the Department of Justice, the Department of Finance, the Department for the Economy and the Department for Infrastructure have all been examining it. The FCA is aware of the problem but powerless to protect consumers. The Treasury is aware of the problem. MPs and MLAs continue to hear from frustrated constituents, yet despite all this—and, I hope, an agreement between the Opposition Front Bench and the Liberal Democrat Front Bench—nothing has actually changed and there is no regulation. While responsibilities pass from one department, committee, regulator and jurisdiction to another, premiums remain higher, choice remains limited and opportunities are denied to people who can least afford it. The solution does not require years of further review or consultation; it requires action. Primary legislation is needed and the Bill is the perfect vehicle to deliver it. The amendment is practical, proportionate and targeted. It seeks to address what may become a market failure and create the conditions for a more competitive, affordable and accessible insurance market in Northern Ireland. This is not a party-political amendment; it simply seeks to ensure fairness in Northern Ireland for consumers and to stop the rip-off merchants operating in this field. I hope that the Government will engage constructively with the amendment and work with us before the Bill goes back to the other place so that we can get the regulation needed. The Bill is all about regulation. This is in the one place in the United Kingdom where we do not have that regulation. We have the ability to make it happen and I hope that the Minister will have some positive things to say. I beg to move.