The House of Commons European Scrutiny Committee met on 4 July 2018 to consider a proposal for amending Directive 2009/103/EC (the consolidating Motor Directive).
The Committee were advised that in May 2018 the European Commission tabled a proposal for significant amendments to the Motor Insurance Directive making the first substantial changes to the legislation since 2005.
The proposal deals with five key areas:
1. Insolvency of the insurer
Compensation bodies must be set up to meet the costs arising from claims where the motor insurer of the liable party is insolvent.
2. Claims history statements
There is provision for a unified "claims history statement" to assist with authentication of such documents and to encourage insurers to take such statements into account when calculating premiums. Further, if an insurer does take the claims history into account for the purpose of determining premiums, there should be no discrimination based on nationality or the policyholder’s previous Member State of residence.
3. Risks due to uninsured driving
A remedy to the increasing problem of uninsured driving is proposed. In 2011 it was estimated that the cost to the EU arising from uninsured driving was £870 million in claims across the EU. As matters stand Article 4 of the Directive prohibits all systematic border checks of insurance of vehicles normally based in another Member State. The proposed amendment sets out wider powers to enable Member States to carry out systematic checks, using technological developments such as automatic number plate recognition (ANPR) technology as long as those vehicle checks form part of a general system of checks, are not discriminatory and do not require the stopping of the vehicle as this would hinder free movement of vehicles. These wider powers will however be subject to any safeguarding provisions relating to personal data within the General Data Protection Regulation.
4. Minimum amounts of cover
The amendment proposes to lay down minimum amounts of cover for personal injury and property damage which is to be updated every 5 years in line with the European Inflation Index and will bring in line the countries that have until now applied lower minimum limits. As the UK already prescribes unlimited cover for motor insurances policies in the case of death or personal injury caused to third parties this will have little or no effect on the UK.
5. Scope of the Directive
The most controversial amendment is the widening of the requirements for mandatory insurance for vehicles used on private land arising from the CJEU Judgments of "Vnuk" "Andrade" and "Torreiro". The amended directive proposes to codify those judgments, the result of which is that compulsory motor insurance will be extended to "use of a vehicle consistent with its normal function, regardless of location of use…." It was anticipated that any amendment would limit the scope of the Directive to ‘traffic situations’, but it is now proposed that it refers instead to vehicles used for ‘transport’. This means that off road vehicles such as mobility scooters that would have been excluded will be in scope under the proposed amendment.
There has of course already been much debate around the "Vnuk" decision. One of the key matters of concern for the UK is when the new Directive might take effect. If the Directive takes effect before the end of the scheduled post-Brexit transitional period on 31 December 2020 then the Government will be under an obligation to implement the directive.
It is envisaged that to do so would require amendments to various primary and delegated legislation including:
- The Road Traffic Act 1988;
- The Road Traffic Act (Northern Ireland) Order 1981;
- The Road Traffic Offenders Act;
The Motor Vehicles (Insurance Requirements) Regulations 2011
Uninsured and untraced drivers
In addition to ensure that the full scope of the "Vnuk" amendment applies in the cases of uninsured and untraced drivers, amendment would be required to the MIB agreements to ensure they are liable to cover accidents on private land and vehicles newly-in-scope, as well as newly derogated vehicles (i.e. categories of vehicle the UK Government chooses to specifically exclude).
The Green Card system
All of this must all be considered and balanced with our future status within the "Green Card System". At the moment largely by virtue of our EU Membership, we benefit from the extended and developed protections and freedoms such as the abolishment of border controls for motor insurance provided for by the Motor Insurance Directives.
The Motor Insurance Directives provide an essential framework ensuring that there is adequate protection for victims of traffic accidents both in the UK and for members of the European Economic Area travelling abroad and visiting other countries within it. Over the years with various addition and amendment the Directives have developed to provide important protection and security to drivers, and instruction and guidance to insurers, for the benefit of all drivers in the European Economic Area.
But what is the potential impact to the continuity of UK drivers having access to the European Economic Area without the need to carry a 'Green Card' and undergo border controls to check the validity of insurance following Brexit day?
Ensuring the protection of UK drivers in the EEA post-Brexit
The UK is currently in the process of obtaining what is known as "Section III" status of the Green Card system and when this is achieved, we will be provided with the same benefits that are given to other non-EEA countries such as Serbia, Switzerland and Andorra and as such, will not be required to prove the validity of their insurance on entry to an EEA country.
However 'Section III' status will not keep in place the protection for UK victims of motor accidents overseas, which we currently call "Fourth Directive" claims, or claims under the "protection of visitors scheme" because the criteria for protection of those accident victims are:
- "Accidents which occur in any country participating in the Green Card System (which would include the UK) but only where the victim resides in an EEA Member State… Alternatively;
- "Accidents which occur when the resident of an EEA Member State visits another EEA country and is injured by an unidentified vehicle"
Neither of those scenarios would apply to UK residents who were injured when travelling in an EEA country if the UK stays out of the European Economic Area and the single market. This raises further questions:
- When is the Government expecting the European Commission to sign off on the UK status as a 'Section III' State in particular whether this can happen before the UK formally leave the EU?
- Is it the Government's intention to negotiate an agreement with the EU that maintains the 'visiting victims' provision of the Motor Insurance Directive for UK nationals visiting the EEA and vice versa?
- If so, what assessment has been made of the legal requirements that this may impose on the UK in terms of continued adherence to all parts of the Motor Insurance Directive including the amendments currently under consideration, in particular whether there will be a requirement on the UK to apply the compulsory insurance requirement in line with the Vnuk judgment.
- If the government is not seeking continued participation in the 'visiting victims' scheme what assessment has been made of the potential cost to the public purse if UK residents involved in traffic accidents in the European Economic Area come to rely to a greater extent on public funded services because they failed to pursue a claim for compensation overseas?
With the proposed changes arising from the Vnuk decision alone estimated to increase insurance premiums in the UK by nearly 2 billion a year (Department of Transport June 18) these are all questions that must be considered. Is this too large a price to pay for the security afforded to victims of accidents abroad, or money well spent to preserve freedom and security when we are no longer EU citizens?