The British Insurance Brokers' Association (BIBA) is the UK 's leading general insurance organisation representing the interests of insurance brokers, intermediaries and their customers. BIBA membership includes 1,700 regulated firms. BIBA brokers handle around half the value of all UK home, contents, motor, travel, commercial and industrial insurance policies. Insurance brokers make a direct and indirect contribution of 1% to UK GDP.
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BIBA’s final submission on Refit of the Motor Insurance Directive
Article 1 – Scope of the directive (VNUK)
The EC is proposing to clarify vehicle use by including a the definition of “use of a vehicle” in order to incorporate the judgements of the Court of Justice of the European Union in the cases of Vnuk, Rodrigues de Andrade and Torreiro. The proposal is to change the use of a vehicle in the Directive to “use of a vehicle means any use of such vehicle, intended normally to serve as a means of transport, that is consistent with the normal function of that vehicle, irrespective of the vehicles characteristics and irrespective of the terrain on which the motor vehicle is used and of whether it is stationary or in motion”. While the EC has indicated that the proposal clarifies the concept of use and where compulsory insurance therefore applies, BIBA still has concerns over the application of this definition which we believe still lacks clarity.
After analysing the impact assessment it is clear to us that the majority of member states do not currently require compulsory insurance for use of a vehicle on private land and therefore the REFIT should reflect the practices and wishes of member states rather than simply accept rulings from the CJEU which have serious ramifications and are not reflective of the wishes of member states.
It would appear that the UK Government has provided actuarial evidence on the cost of motorsport insurance being an additional £229 million per year. These figures can only be considered hypothetical as the experience of BIBA members is that no insurer would provide a directive compliant Motor Third Party Liability (MTPL) policy for competitor to competitor motorsport, due to the frequency and severity of claims making this risk uninsurable in the UK market as well as the majority of EU markets.
We disagree with the impact assessment statement on the impact of motorsports in Finland following their introduction of compulsory MTPL policy for motorsports, because we understand that within three months of the requirement being introduced, insurance premiums have increased twenty-fold to unaffordable levels for EU citizens and it is inherent on the EC to investigate this before imposing compulsory MTPL for motorsports. BIBA further understands that Finnish legislation states that no third-party insurance is compulsory when vehicles are driving in an ‘enclosed’ area. So again, their current legislation does NOT comply with the interpretation of the Directive given in the VNUK judgement and the EC’s assertion in the Impact Assessment that ‘..countries such as Finland which already require MTPL insurance in line with the Directive….’ (page 156) is, in fact, incorrect.
We are also concerned that there is no definition of ‘transport’ within the draft directive which will create uncertainty and increase cost, because clarification will only be provided when legal cases are dealt with by the CJEU on this issue. For example, different definitions of transport may include:
– take or carry (people or goods) from one place to another by means of a vehicle, aircraft, or ship.
– a system or means of conveying people or goods from place to place.
BIBA would contend that vehicles not designed for transport, like lawnmowers and motor racing vehicles on a circuit, are out of scope and it would be helpful if this could be specified in the Directive.
For the avoidance of doubt, BIBA’s view is that motorsport should be explicitly excluded.
The widening of the definition of a vehicle, and confirmation that MTPL insurance will apply to private land, will bring into scope ‘vehicles’ such as ride-on-lawnmowers, fairground rides, agricultural vehicles, museum vehicles, children’s toys, golf buggies, and fork lift trucks being operated in commercial properties. These should be excluded from the requirement to arrange MTPL insurance. For example ‘lawn-mowing’ is defined as ‘to cut down (grass) with a machine’. In no way does it refer to the transport of people or goods therefore should be excluded from the Directive.
One other special category that should be excluded from the Directive is mobility scooters. These are vital for the lifestyle of older and vulnerable citizens who will not understand registration and insurance requirements, and would be subject to paying a new premium or risk breaking the law and being convicted. Their only other alternative is to give up their mobility.
There is also the impossible burden of enforcement of the requirement for compulsory MTPL insurance for these vehicles and also fraud, for example fake injuries involving an unregistered lawnmower on private land.
If the Motor Insurance Directive is not amended to remedy the situation there could be huge and costly issues that the UK will have to consider:
Registration – the UK Government may have to create a register of newly in-scope vehicles – forklift trucks, agricultural machinery, construction machinery, ride-on lawnmowers, mobility scooters etc.
Licensing – there would be a need to licence the users of newly in-scope vehicles.
Type approval – as many of the newly in-scope vehicles are not designed to travel on roads they will not comply with the European Community Whole Vehicle Type Approval (ECWVTA), which applies to vehicles capable of more than 4mph or the Motorcycle Single Vehicle Approval (MSVA) scheme.
Following the concerns mentioned in this document with fraud, uninsured driving and motorsport we strongly propose to the EC that rather than change the definition of use of a vehicle, instead the EC revert to the earlier solution suggested in their roadmap regarding definition on a vehicle. BIBA believe that this will overcome the problems raised and therefore suggest the following:
‘use of a vehicle’ means any use of such vehicle, intended normally and at the time of the accident to be used in traffic, that is consistent with the normal function of the vehicle, irrespective of whether it is stationary or in motion and all motorsport is specifically excluded.
Article 4 – Checks on Insurance
BIBA welcomes the proposal from the EC that will allow, without interfering with free-movement, checks on the validity of insurance especially if they are driven by technology, are non-discriminatory, not aimed exclusively at insurance verification and do not require the vehicle to stop.
BIBA does share the concerns of the Association of British Insurers (ABI) that there is a discrepancy in the EC’s desire to tackle uninsured driving whilst at the same time extending the scope of the Directive to include many new types of vehicle, as well as the new requirement for compulsory MTPL insurance on private land, which will lead to a sudden and substantial increase of uninsured vehicles, due to the difficulties with enforcement and ensuring mass compliance of millions of vehicles that many Governments pre-ruling felt were not required to have compulsory MTPL insurance.
Article 9 – Minimum amounts of cover
BIBA supports the harmonisation proposal that there should be equal minimum levels of protection across the EU member states, to ensure that there is a sufficient level of minimum protection across the EU for the innocent parties to motor vehicle accidents in relation to personal injury compensation and damage to property irrespective of the type of vehicle.
Article 10a – Insolvency of an insurer
BIBA is satisfied with the EC’s proposal in relation to compensation arrangements ultimately being the responsibility of the home member state of the insurer concerned. The Financial Services Compensation Scheme already fulfils this function in the UK.
BIBA is concerned in relation to paragraph 10A 1. (c). This question was not considered as part of the EC’s public consultation. It is unclear whether this applies just to an insolvent undertaking as we believe the intention must be. We do not believe it should apply to a solvent insurance undertaking. In the UK market the Financial Conduct Authority (FCA) rulebook lays down rules that insurers are required to comply with, including the requirements to:
- handle claims promptly and fairly;
- not unreasonably reject a claim (including by terminating or avoiding a policy); and
- settle claims promptly once settlement terms are agreed.
Therefore the Directive should be clear that this only applies to an insolvent insurer.
Article 16 – Claims history statements
BIBA welcomes the equality of treatment of claims history statements across differing member states but expresses caution in the detail of how these might be required to operate. BIBA believes that any prescriptive requirement for uniformity will create an administrative burden, significant IT system changes and add cost into a system which already works well in the UK and is ultimately paid for by the premiums paid by customers.
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