Background briefing on the Motor Vehicles (Compulsory Insurance) Bill
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Briefing paper prepared by the House of Lords Library on the Motor
Vehicles (Compulsory Insurance) Bill The Motor Vehicles (Compulsory
Insurance) Bill is a private member’s bill introduced in the House
of Commons by Peter Bone (Conservative MP for Wellingborough). It
aims to reverse a 2014 decision of the Court of Justice of the
European Union that expanded the types of vehicles required to have
compulsory third-party motor insurance. The bill received
Government support in...Request free
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Briefing paper prepared by the House of Lords Library on the Motor Vehicles (Compulsory Insurance) Bill The Motor Vehicles (Compulsory Insurance) Bill is a private member’s bill introduced in the House of Commons by Peter Bone (Conservative MP for Wellingborough). It aims to reverse a 2014 decision of the Court of Justice of the European Union that expanded the types of vehicles required to have compulsory third-party motor insurance. The bill received Government support in the Commons and the Labour Party did not oppose it. Its second reading in the House of Lords has not yet been scheduled. Background and aim of the bill The Road Traffic Act 1988 is the main legislation governing which drivers in England, Wales and Scotland must have motor insurance covering injuries and property damage to third parties. The act’s provisions limit compulsory insurance to drivers of vehicles on roads and in other public places. It also defines the types of vehicles which must have insurance as those which are “mechanically propelled vehicle[s] intended or adapted for use on roads”. However, the legal position was altered by a decision in 2014 by the Court of Justice of the European Union (CJEU). This extended the requirement for compulsory motor insurance to include vehicles used on private land and to vehicles not constructed for road use. The ruling, known as Vnuk, applied in the UK when it was a member of the EU as case law affecting the interpretation of the 1988 act. The ruling continued to have effect after the UK left as part of retained EU case law. The sponsor of the bill, Peter Bone (Conservative MP for Wellingborough) has given examples of vehicles that he said would require insurance under Vnuk, including: ride-on lawnmowers in back gardens; golf carts that never leave the golf course; and tractor-trailers that do not leave a farm. According to the Government’s impact assessment for the bill, a key implication of Vnuk is that it is likely to lead to a rise in motor insurance premiums. This is because claims resulting from the expanded range of vehicles specified in Vnuk are admissible by the Motor Insurers’ Bureau (MIB). MIB is a statutory body that operates a compensation scheme for victims who have suffered injury or loss as a result of uninsured or untraced drivers. It is funded by a levy on motor insurance companies. The costs of the levy may ultimately be passed through to motorists through increases in insurance premiums. Therefore, an increase in the scope of claims payable by the MIB, such as that brought about by Vnuk, could increase insurance costs for motorists. Other possible issues resulting from the Vnuk judgment include:
Further, the Association of British Insurers has stated that the additional insurance cover brought about by Vnuk was not necessary in the UK. It said the claim would already have been covered by other insurance policies, such as compulsory employer’s liability and public liability. The aim of the Motor Vehicles (Compulsory Insurance) Bill is to reverse the effect of the CJEU decision and return the position to that prior to 2014. It would also mean that claims from the wider categories of vehicle were not admissible by the MIB. Key provisions The bill consists of two clauses. Clause 1 contains the substantial provisions. It would insert a new clause into the Road Traffic Act 1988. This would have the effect that the part of retained EU case law affected by the Vnuk judgment could be ignored when interpreting the compulsory insurance requirements in the Road Traffic Act 1988. The clause also contains certain connected provisions; for example, it states that:
Clause 2 states that the bill would come into force two months after royal assent. It also says it extends to England, Wales and Scotland and provides its short title. The explanatory memorandum states that the bill deals with matters that are within the legislative competence of the Northern Ireland Assembly but not within the competency of the Welsh and Scottish Parliaments. Therefore, the bill does not legislate for Northern Ireland. At committee stage in the Commons, Mr Bone said that the Northern Ireland Assembly “is watching the progress of this bill carefully and if it becomes law the assembly will look to produce something similar”. He stated that there was nothing in the Protocol on Ireland and Northern Ireland in the EU-UK Withdrawal Agreement that would prevent this. Government position In 2016 to 2017 the Government carried out a consultation on the subject to inform both discussions with the European Commission and the Government’s position after it left the EU. The summary of responses to the consultation stated that 94% of respondents thought the CJEU decision resulted in a worse position than the previous UK law. In the consultation summary, the Government said it would set out its proposed way forward “in due course”. In August 2019, the Government Actuary’s Department (GAD) published an analysis of the effect of the judgment. GAD concluded that the additional insurance premiums necessary to provide cover to fully comply with the CJEU judgment and its impact on the MIB could be more than £2bn, although this was subject to a high degree of uncertainty. The Government’s impact assessment estimates that this could lead to an average increase in premiums of £50 for each motorist. The MIB has stated that the implications of Vnuk would lead to “very considerable, costly and disruptive change […] which goes far beyond pure insurance-related provisions”. In February 2021 and June 2021 the Government announced its intention to reverse the effect of the decision by amending retained EU law. The Government has since stated that the bill is the “best possible opportunity to address the issue at the earliest possible opportunity”. Therefore, it supported the bill in its passage through the House of Commons. The Department for Transport has assisted with drafting the bill. It has also written explanatory notes and conducted an impact assessment. House of Commons stages The bill received its second reading without debate on 29 October 2021. The bill was considered by a public bill committee in a single sitting on 5 January 2022. Key aspects of the debate are summarised in the previous sections of this article. No amendments were tabled and the bill was reported without a division. As the bill was not amended in committee, there were no formal proceedings at report stage. The third reading debate took place on 28 January 2022. In the debate, Mr Bone addressed the question of whether insurance premiums are currently higher because the Vnuk judgment is now part of UK law. He said: The motor insurance industry knows that the bill is making progress, so it has not put the £50 on. […] It is not that people will see their motor insurance go down by £50 per year, but that they will not see it go up by £50 a year. The Parliamentary Under Secretary of State for Transport, Robert Courts, reiterated the Government’s support for the bill. The Shadow Minister for Transport, Mike Kane, did not oppose the bill. He called for consideration of other factors that affected motor insurance premiums, such as potholes. The bill was passed without a division. It was subsequently introduced into the House of Lords on 31 January 2022. Read more
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