BIBA response to the Home Office Consultation on reform of the Riot(Damages) Act 1886

1st August 2014

The British Insurance Brokers' Association (BIBA) is the UK's leading general insurance intermediary organisation representing the interests of insurance brokers, intermediaries and their customers.

BIBA membership includes just under 2,000 regulated firms, who employ more than 100,000 staff.  General insurance brokers contribute 1% of GDP to the UK economy, they arrange 53% of all general insurance and 81% of all commercial insurance business. Insurance brokers put the client’s interests first, providing advice, access to suitable insurance protection and risk management.

Summary

BIBA has been involved from the outset in the review of the Riot Damages Act and met with Neil Kinghan, the independent reviewer of the Act. BIBA has also subsequently met with the Home Office. 

 

BIBA’s property committee worked through the new consultation in detail.

 

We are pleased with many improvements being suggested by the consultation including the proposals about recognising riot areas, longer deadlines for making a claim, interim payment proposals and the discussion over new for old-cover instead of indemnity although there are some areas where we are concerned for customers. For example; the proposed cap on claiming compensation and not being able to recover an excess. We are suggesting an alternative approach.


Question 1 – What definition of ‘riot’ do you think should be used in future?

BIBA believe that paragraph 1 under the existing Riot Damages Act definition below is agreeable:

Compensation to persons for damage by riot.

(1) Where a house, shop, or building has been injured or destroyed, or the property therein has been injured, stolen, or destroyed, by any persons riotously and tumultuously assembled together, such compensation as hereinafter mentioned shall be paid out to any person who has sustained loss by such injury, stealing, or destruction; but in fixing the amount of such compensation regard shall be had to the conduct of the said person, whether as respects the precautions taken by him or as respects his being a party or accessory to such riotous or tumultuous assembly, or as regards any provocation offered to the persons assembled or otherwise.

but the definition does need modernising so the words ‘house, shop or building’ should instead be replaced by the word “property”. The style of language used e.g “tumultuous” is slightly old fashioned and we would suggest this be reviewed by modern day language.

 

We think the RDA definition is preferable as it does not have a requirement to demonstrate there were 12 people. This can be difficult for a distressed individual to prove.  

 

Question 2 – Which of the following approaches and targets do you think should apply to PCCs for determining which areas qualify as riot areas?

We do not believe the decision on whether the activity is a riot should lie with the Police and Crime Commissioner as this is a fundamental conflict of interest. It should instead rest with a separate panel of independent officials which should be consulted upon. This is following the problems experienced in 2011 where some Police forces and MP’s would not acknowledge the events were a riot making it a very difficult situation for many victims.

We do not believe that PCC’s should have this power. An independent panel would therefore avoid any conflict of interest.

Therefore our answer to 2 is a variation of B for the decision makers to determine the core riot zone. This implements the riot zone proposal the BIBA property committee suggested to Neil Kinghan. We are pleased with the proposals to recognize riot areas, this should make it much easier for individual property owners in a designated area to establish a claim, giving greater certainty an reassurance to victims. It must still allow for isolated incidents outside of the core riot zone though enabling them to establish their isolated claim.   

Question 3 – What arrangements and safeguards against fraud do you think should be made for claims for motor vehicle damage?

We agree with the recommended repairer proposition.  It is positive to include motor vehicles, however it is disappointing that insurers are unable to recover their losses. Surely the same moral principle mentioned in 2.1 of the consultation document (police accountability for riot damage and how the Police are intrinsically linked to preventing or quelling such disturbances) should remain, we do not see why a policyholder should lose the no claims bonus (NCB), excess and insurer foot the bill. If the Act did allow insurers to recover their losses this could potentially lead to cheaper premiums, but as things are proposed here 96% of UK Vehicles would be ineligible.   


Question 4 – To what extent do you agree or disagree that riot victims should be compensated on a new-for-old instead of an indemnity (old-for-old) basis?
 

Answer a) Strongly agree:

We strongly agree with riot victims being compensated on a new for old basis. In line with similar insurance policies. This is consistent with current modern practice as evidenced in the insurance industry. With the caveat that the existing common law of indemnity remains unchanged.  

 

Question 5 – To what extent do you agree or disagree that a cap should be applied to the amount that insurance companies can reclaim under the riot damages act?


Answer e) Strongly disagree:
We believe the aim of the Act is that those that have suffered losses can receive compensation to enable them to be put back into a similar position than before the claim occurred. We cannot see a case for discriminating against different businesses just because of a blunt instrument like the size of their turnover. The responsibility on the Police to keep the peace remains the same and the need for compensation is no less.

 

This is made very clear in 7.1.1 on page 41 of the Neil Kinghan Led Independent review where it stated “I recommend that the principle accountability for riot damage should be retained in new legislation to replace the existing Act.” A large business who suffers at the hands of rioters may have to lay off staff, fail to meet contracts which could have a grave effect on the business.

 

One other concern is that premiums could go up for everyone to cover this shortfall. BIBA is concerned that insurer body the ABI have said that there is a potential risk of some of their insurer members withdrawing cover from high risk areas if this cap is forced through.

Question 6 – To what extent do you agree or disagree that a cap should be based on business turnover?

Answer e) Strongly disagree:
We do not agree that there should be a cap at all and turnover would not be a sensible approach anyway which would mean inequalities between different business models.

Question 6a) – If you believe a different method should be used, please describe it below.

We do not agree there should be a cap, any restriction would need to disregard the “turnover” proposal and instead consider a financial claim limit. But this still has many fundamental problems, so we do not support a cap or a limit.

Question 7 – To what extent do you agree or disagree that £2m is an appropriate figure for Answer e)

Answer e) Strongly disagree:
We think it is unfair to impose a cap on these businesses.

Question 8 – To what extent do you agree or disagree that a (£2m) cap should be applied to uninsured businesses who make claims under the Act?

Answer e) Strongly disagree:
There should be no cap for uninsured businesses. They will receive no compensation despite the liability with the police.

Question 9 – What key issues might result from applying the annual business turnover cap to landlords and agents of rented and leased properties? –

There is no correlation between rental income turnover and the value of the asset that is owned by the landlord and at risk of damage from a riot.

 

Question 9a – To what extent do you agree or disagree that £2 million is an appropriate figure for a business turnover cap to be applied to landlords and agents of rented and leased properties?

Answer e) Strongly disagree

Question 10 – To what extent do you agree or disagree that claims made under the Act should attract an excess?

Answer e) Strongly disagree:
We strongly disagree. In a non-fault motor accident the innocent victim is allowed legally to recover their excess from the negligent party who was in breach of their duty of care. Therefore, we believe that the innocent victim of a riot should also be allowed to recover their excess under the Act as the Police have the ultimate responsibility to prevent the loss.

Question 11 – Should the police be held liable under the Riot (Damages) Act for riots that occur in prisons, young offender institutions, immigration detention centres or other secure facilities?

No comment.

 

Question 12: Which option on the deadline for submitting claims is more appropriate?

Answer d) Other
BIBA believe that a modification to answer b (90 day application period to submit all details) is the correct way forward. We think there should be 90 days to submit the initial form and then the act should state that all details should be provided as soon as reasonably practical. The reason we are suggesting this is because Business Interruption losses take some time to calculate and therefore it cannot be predicted how long this will take.

 

The full extent of the loss will not be known until the results of the business are no longer affected by the damage and the business back in the position it would have been had the damage not occurred.   


Question 13- To what extent do you agree or disagree that it would be appropriate to introduce the ability to make an application later for those whose insurance claims are repudiated?

Answer a) Strongly agree.

Question 14 – to what extent do you agree or disagree that introducing the ability to submit claims by phone or e-mail would simplify the process of making an application?

Answer a) Strongly agree:
BIBA believe that modern methods for submitting claims by e-mail and phone should be allowed.

Question 15 – To what extent do you agree or disagree that interim payments would assist in processing claims and speeding up decisions?

Answer a) Strongly agree:

This is very important for those who have suffered at the hand of rioters and will help with their cash flow during the rebuild process. Payments on account are commonly used in the settlement of business interruption losses.


Question 16: What else might be useful to support PCCs in handling localised riot claims?


The riot claims bureau terms of reference should also offer support.

 

Question 17: What issues can you perceive in the setting up and running of a Riot Claims Bureau?


We agree with this proposal and believe there should be a cross section of insurance industry experts from all areas of the market, including insurers, loss adjustors, loss assessors and brokers.

The bureau should be transparent and have an easy to navigate website setting out all of the documents and procedures with contact details. The Home Office should be responsible for this and should create the necessary mechanism similar to the Government’s COBRA mechanism so that all the key stakeholders can be contactable and be in a position to discuss issues within 24 hours notice.

We recommend that appointed Home Office officials should ensure the website is kept up to date on a continual basis.

 

Question 18: Which of the following targets do you think a Riots Claims Bureau should be given for resolving small value claims (under £10,000)?
 

Answer d) Other.

Each claim has to be considered on its merits and rather than be prescriptive we think that the overarching principle of being fair and prompt as required by our regulator the FCA in regard to insurance claims should apply.

 

Question 19: How could the Government better equip local authority frontline staff to advise on riot compensation payments in the aftermath of civil disturbances? (You may choose more than one option)

A combination of answer a) (training for front line authority staff and b) a tool kit for use by authority staff). There should be periodic training available for nominated people and a manual available to them at all times.

Question 20a: Which of the following best describes you or the organisation or sector that you represent?

Insurance Brokers

Question 20b: If you represent a business or group, please state the size of your organisation, by approximate number of employees or members:

250 +

 

We look forward to meeting you to discuss this in further detail.

Yours faithfully   

 

Graeme Trudgill

Executive Director

0207 397 0218

trudgillg@biba.org.uk