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Life for uninsured drivers is going to get tougher thanks to the biggest change in motor insurance law for 70 years, explains Graeme Trudgill from the British Insurance Brokers’ Association
This is a momentous year for motor insurance and in particular for the estimated 1.4 million motorists in the UK who drive uninsured. Life for them is going to get tougher thanks to the biggest change in motor insurance law for 70 years in the form of the new Continuous Insurance Enforcement (CIE) regulations.
The CIE regulations create a new offence for keeping a vehicle without insurance. An additional enforcement scheme is also being introduced from 20 June 2011 to make sure that all vehicles are insured or a Statutory Off Road Notification (SORN) is made.
CIE differs from existing police on-road enforcement of uninsured driving in that, unless a SORN declaration has been made by the vehicle keeper, the keeper is required to insure the vehicle at all times.
All registered vehicle keepers must ensure that their vehicle has statutory minimum third party motor insurance. Failure to comply could result in a series of escalating penalties. All motor insurance records will be registered on the Motor Insurance Database (MID), if records are not correct the keepers of legitimately insured vehicles could be at risk of receiving notification that they appear to be uninsured.
This is a fundamental improvement to the previous practice (before an uninsured driver needed to be ‘caught’ on the road to face enforcement measures) therefore BIBA is keen to raise awareness of how these changes in law will affect motorists.
How does CIE work?
CIE systematically compares records between two databases, the Motor Insurance Database (MID) with those held on the DVLA Registered Vehicle Database to identify keepers of potentially uninsured vehicles.
This will clearly identify any vehicle keepers who do not have a valid insurance policy on the MID.
If it appears that a vehicle has no insurance or no SORN, than an Insurance Advisory Letter (IAL) will be sent to the registered keeper. If the registered keeper takes no action, the keeper faces a fixed penalty fine of £100; having the vehicle clamped, seized and destroyed; and court prosecution with a possible fine of up to £1,000.
Starting in June 2011, the Motor Insurers’ Bureau (MIB) will issue and cover the cost of the new IALs to registered keepers informing them that their vehicle appears to be uninsured. The letter will advise the keeper what they need to do to comply with the law and will result in hundreds of thousands of letters being sent to vehicle keepers, some of whom may be insured but have not had correct details loaded onto the MID.
DVLA will be responsible for the cost of enforcement, which will take the form of Fixed Penalty Notices (FPN) followed by the possibility of prosecution and/or wheel clamping should the vehicle’s keeper fail to heed the warnings. The cost of enforcement will be more than covered by fine income and is due to commence a short while after the first IALs are distributed.
What is the insurance industry telling customers?
Uninsured drivers cost the UK about £500 million annually, which adds up to an average cost of an extra £30 per car insurance policy. Drivers using their vehicle on the road without insurance are already committing an offence – so the need to get insured immediately.
Those drivers with insurance whose record does not appear on the MID should contact their insurance provider to get the MID updated immediately. This will mean that they avoid the inconvenience of being unnecessarily contacted by MIB and DVLA, or being stopped by the police.
Insurance records on the Motor Insurance Database can be checked for free at www.askmid.com
A SORN declaration has to be submitted to the DVLA if the vehicle is being kept off of the road. If the vehicle is taxed return the disc (including nil value discs) to DVLA using a V14 form.
There are some occasions when a vehicle can have no insurance. A vehicle can have no insurance if it:
• Has a valid SORN
• Was exempted from SORN (as untaxed on or before 31/01/1998 and has had no tax or SORN activity since)
• Is recorded as ‘stolen and not recovered’ by the police
• Is between keepers
• Is scrapped
• Is held in stock by an authorised motor dealer
One common question BIBA is asked is: if someone uses a company car and is therefore not the official owner, will their company get a letter if the car is not insured?
If the company is listed as the vehicle’s registered keeper, they will receive a warning letter, followed by a penalty if there is no valid insurance policy.
Drivers should make a point of checking the MID to see if the details of cover are recorded correctly when insuring the vehicle. Although most insurers process the information promptly on the MID it is best to allow a week for this to update.
CIE is an important change to the motor insurance landscape. The MIB will be sending tens of thousands of IALs a month. CIE benefits will include safer roads, greater premium income for the insurance industry, a reduction in the number of claims made to the MIB, a reduced levy to insurers and an increased IPT income to government.
Battling insurance costs
Another important development with motor insurance follows BIBA’s appearance before the Transport Select Committee's inquiry into the cost of motor insurance – which had increased by 40 per cent in the previous year – affecting vehicle owners of all types.
BIBA submitted an eight point plan to the Transport Select Committee into driving down the cost of motor insurance:
• Government must introduce Continuous Insurance Enforcement (CIE)
• Signpost people to a relevant broker where they can find competitive cover (particularly young or non-standard drivers)
• Regulate comparison sites to the appropriate standard
• Review Pass Plus
• Review the driving test
• Engage with Lord Justice Jackson’s review of civil litigation costs
• Refrain from any further increase in insurance premium tax
• Provide access to driving licence records.
BIBA was pleased that the committee’s recommendations included many of the points that were in its eight point plan. The recommendations from the committee's report tackled issues with fraud, personal injury claims, young drivers and uninsured driving.
The report recommended that insurers, brokers and comparison websites should work together more proactively to combat fraud. BIBA is committed to this and will work to achieve access for the industry to driving licence information held by the DVLA in order to reduce fraud when applying for insurance.
Currently around 20 per cent of endorsements are not correctly disclosed to the insurance provider and this can lead to problems in the event of a claim as insurers could refuse to pay out if the customer had not told them of a 'material fact.' Motor insurance fraud accounts for £44 on every policy and so any initiative to reduce that is welcomed by BIBA.
Young drivers
BIBA also supports the call to investigate means of deploying and publicising new technology which can assess how cars are driven by young drivers and help reduce the cost of motor cover. There are already several new insurance broker 'black box' telematics products that have been recently launched and BIBA welcomes further discussion and wider debate on this technology.
BIBA welcomed the Transport Select Committee’s conclusion that the driving test should be more rigorous and that an advanced driving course would be made available which can effectively signal to insurers that drivers who have completed it are safer. It is now time to review the Pass Plus test and BIBA looks forward to the proposed consultation.
The report calls for the government to sponsor a research project on the international experience of restraining the number of personal injury claims with the aim of publishing a discussion paper.
The report referred to one of BIBA's key reasons for the higher cost of motor insurance as the increase in the propensity to claim, the increase in the amount awarded, the impact of claims management companies and the increases in the number of whiplash claims.
The propensity to claim for a non-fault injury following a motor accident has tripled in the last seven years and this has led to more claims and higher premiums.
BIBA is also pleased that the Government Equalities Office (GEO) consultation paper 'Equality Act 2010: Ending age discrimination in services, public functions and associations' issued on 3 March 2011 recommends its signposting proposal for motor insurance in relation to age. This is so that younger or older drivers struggling to find insurance will be helped to find a more suitable provider rather than just be rejected.
So there will be a lot of motor insurance issues on BIBA’s agenda as well as the government’s. A busy year lies ahead in the motor insurance world once again.
