Compensation Bill [HL]

I am grateful to the noble Lord for raising an important point. We have a provision to establish a compensation scheme in the Bill. It has been included because we know that some claims management companies are involved in handling clients’ money—for example, those handling claims for mis-selling of endowment policies and claims from the Criminal Injuries Compensation Scheme. Some firms dealing with claims for compensation on behalf of clients could hold many thousands of pounds of clients’ money at any one time. The compensating insurer typically makes the payments to the claims company, which extracts its fee before passing on the compensation payment. The compensation would be used to make good the loss to clients of money caused by authorised persons stealing funds or going bankrupt. We will bring forward an amendment to clarify the operation of the scheme—particularly its funding and operation. I turn specifically to the noble Lord’s amendments. I accept the principle behind them completely. I want to make it clear that we intend that the funding for any compensation scheme will be met by authorised persons. We envisage that the scheme will be funded by an additional levy on authorised persons who hold client funds as part of the claims service provided. Paragraph 13(2)(b) already permits that but we want to make it clear in the Bill. Amendment No. 105 seeks confirmation about the purchase of bonds or indemnity insurance. Again, I want to make it clear that there is no intention that compensation to consumers for a claims manager’s wrong-doing, or funds to pay for a bond or indemnity insurance, should be funded from public money. It will be a clear requirement for the regulator at the time he is in a position to set up the scheme to seek a bond or indemnity insurance. I have already explained how that will be funded. We do not see a need for a provision for appeal here as any decision to make a payment from the compensation fund would be made after due and careful consideration of the facts by an independent disciplinary mechanism. We intend to clarify this arrangement further in the amendment that we will bring forward to meet the concerns of the Delegated Powers and Regulatory Reform Committee. There will be a separate appeals mechanism from the disciplinary panel, so an appeal provision in paragraph 13 is not necessary in this context. I hope that I have reassured the noble Lord that this is not about the use of public money. I also hope that I have reassured him that we will be clarifying this matter further, making it crystal clear in the Bill, and bringing forward the appropriate amendments before the next stage. On that basis, I hope that the noble Lord will feel able to withdraw his amendment.