Is the law on third party motor insurance fit for purpose?

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Is the law on third party motor insurance fit for purpose?

Published 2 agosto 2017

Vnuk v Triglav

Ever since the CJEU found in the 2014 Slovenian case of Vnuk v Triglav that the EU consolidated Sixth Motor Insurance Directive (MID) requires all motorised vehicles to be compulsorily insured against third party risks, wherever they are being used for their normal function, the UK government has been at risk of Francovich damages for failing to properly implement the Directive into UK domestic road traffic law.  Remember, s143 Road Traffic Act 1988 only requires motor vehicles to be insured for use ‘on the road or other public place.’

The implications of Vnuk are far reaching and the decision has received a great deal of criticism.  The Foreign Secretary, Boris Johnson recently referred to the decision as ‘insane’ saying:

‘What has it got to do with the so-called single market, whether I tootle around my garden on an undersized quad bike?’

Possible amendment of the Directive - Comprehensive vs Amended Directive options

Seemingly recognising the unintended consequences of Vnuk, in June 2016 the European Commission (EC) issued an Inception Impact Assessment, in which it considered four options, to include:

  1. Doing nothing – thereby allowing Vnuk to stand, and bringing a whole host of off-road motorised vehicles newly-in-scope, such as ride on lawnmowers and even dodgem cars.  This is known as the ‘Comprehensive option’; and
  2. Narrowing the definition within the MID such that motor insurance is only required for vehicles used ‘in traffic situations’.  Whilst wider than the definition under s143 Road Traffic Act, the ‘Amended Directive’ option as it has become known is considerably narrower than the Comprehensive option.

DfT consultation

December 2016 saw the UK government enter the debate when the Department for Transport (DfT) issued a consultation paper considering potential changes to the domestic road traffic legislation.  The consultation was limited to consideration of the Comprehensive and Amended Directive options only.

DAC Beachcroft Claims Limited responded to the DfT consultation which closed in April, in which we highlighted our concerns in respect of the Comprehensive option.  Amongst other things we highlighted the risk of increased fraud, and difficulties in enforceability of a comprehensive insurance regime for vehicles used exclusively off-road.  Our response to the question set can be viewed here.

Reviewing the Directive – European Commission REFIT programme

Having failed to act on its original Inception Impact Assessment in 2016, the EC has recently issued a further Assessment which not only replaces that of June 2016, but also extends its reach to incorporate a wider review of the MID using its Regulatory Fitness and Performance (REFIT) programme.  The EC has recently published a public consultation on REFIT which closes on 20th October 2017.  Alongside consideration of the divergent applications of the MID (the Vnuk isuse), the EC has identified other issues for consideration, such as the mandatory provision of information by policyholders in respect of past claims; the obligation for guarantee funds to meet the cost of claims where the motor insurer of the liable party is insolvent; and the adequacy of minimum amounts of cover and whether they should vary for different classes of vehicle.

The EC will also look at whether the MID remains suitable in light of technological developments in the automotive industry, particularly in anticipation of the advent of automated vehicles during the next decade and consideration will need to be given to different models of dealing with motor liability claims, such as the ‘single policy’ approach proposed by the UK government in the Automated and Electric Vehicles Bill.

Responses to DfT consultation

At the same, the DfT has recently published a summary of responses to the December 2016 consultation, which includes specific reference to observations made by DAC Beachcroft Claims Limited in our response. The responses overwhelmingly support our concern that the Comprehensive option is unworkable, as it will bring a very large, but unidentifiable number and type of off-road vehicles newly-into-scope, which risks increasing motor fraud, uninsured and untraced driving, and putting an unacceptable strain on the MIB, as the UK’s guarantee fund, which ultimately will be borne by consumers of road going vehicles in their motor insurance premiums.  DAC Beachcroft Claims Limited firmly believe that it is important to maintain a link between the requirement for compulsory third party motor insurance and road traffic situations.  After all, the whole purpose of the MID is to facilitate free movement of people throughout the European Union, by facilitating the free movement of vehicles.


Whilst the EC suggests that it will commence planning in Q4 2017, we know from experience that such timetables can slip.  In addition, even if the EC does look to narrow the scope of the MID insofar as the requirement for compulsory third party motor insurance is concerned, the REFIT procedure could take a number of years, by which time the UK may have already left the European Union.

We eagerly await the government’s response which will set out the proposed way forward for the UK.  It may of course be in the UK government’s best interests to follow suit with Europe on the issue of compulsory third party motor insurance post-Brexit to facilitate both trade and tourism.  Much will depend on the EC’s next move.  Whilst the ‘Amended Directive’ option may be palatable to the UK government, the ‘Comprehensive’ one most likely won’t be.


Peter Allchorne

Peter Allchorne


+44 (0) 117 918 2275

Tom Baker

Tom Baker


+44 (0) 117 918 2758

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