The following is the first edition of a new monthly Insurance Business column written by Graeme Trudgill, executive director of BIBA.
This Directive REFIT appears to be about five things: claims history statements; insurer insolvency; minimum amounts of cover; insurance checks; and scope. In reality it’s about one thing - Article 1, Scope of the Directive, which will, once and for all, set a concrete position following the Vnuk ruling.
As a reminder, 11 years ago in August 2007, Damijan Vnuk, a Slovenian farmer, was injured when knocked off his ladder in a barn by a reversing tractor. He pursued the insurer of the tractor for compensation but was refused. Mr Vnuk took his case all the way to the Court of Justice of the European Union and their 2014 ruling created some unintended consequences for UK motor insurance law, bringing many new types of vehicle into scope.
The European commission is now proposing to clarify vehicle use by including in the Directive a definition “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.” The commission has indicated that the proposal clarifies the concept of use and where compulsory insurance therefore applies.
However, BIBA has concerns around the application of this definition. There is no definition of ‘transport’ within the new draft directive which creates uncertainty. In addition, the proposal brings vehicles used on private land into scope for compulsory motor insurance.
BIBA’s view is that vehicles not designed for ‘transport’, like lawnmowers and racing cars on a circuit, should be out of scope.
We believe motorsport should be explicitly excluded. Our members’ experience is that no insurer would provide a directive compliant Motor Third Party Liability policy for the competitor to competitor risk in motorsport due to the frequency and severity of claims. It is in fact uninsurable in the UK as well as the majority of EU markets.
The commission’s proposals could still bring into the scope of compulsory motor insurance ‘vehicles’ such as ride-on-lawnmowers, fairground rides, mobility scooters, agricultural vehicles, museum vehicles, children’s toys, golf buggies, and forklift trucks. It could be argued that this will bring new opportunities for the insurance sector, however, there are wider issues for consideration including registration, licencing, type approval and enforcement – and, of course, the potential for fraudulent claims.
BIBA’s proposal to the commission is that rather than change the definition of use, instead they could amend the vehicle definition to ‘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’.
We are working with industry colleagues at the ABI and MIB on this and are waiting to see the outcomes. Perhaps Brexit is the ultimate answer!
