The Government Actuary’s Department (GAD) has undertaken a
high-level review to explore the potential impacts of a
court ruling on the scope of the compulsory motor insurance
cover.
The review was written
for the Department for Transport (DfT) which asked GAD
to look at the range of costs involved in extending
insurance cover. The changes affected both existing vehicle
types as well as new vehicles and activities, including the
impact on UK motor sports.
Legal ruling
The legal ruling came about after a court case was brought
by a Mr Vnuk, a farm worker in Slovenia. He was injured in
an accident involving an insured tractor and a trailer, on
farmland in 2007.
Domestic courts rejected the claim, but it was subsequently
referred to the European Court of Justice who ruled in
favour of the farm worker; the Vnuk Judgment.
This challenged the UK’s interpretation of motor insurance
requirements, potentially increasing both the types of
vehicle that needed to be covered and the situations when
insurance was needed.
GAD’s expertise
GAD undertook the analysis between 2017 to 2019. We
considered the impact of a number of different policy
options that DfT could pursue in response to the legal
ruling.
In further analysis in 2019, GAD revisited the assumptions
relating to motor sport activity in the UK. This reflected
new research which suggested the amount of unlicensed
activity in motor sport was higher than originally
anticipated. The updated UK motor sport exposure was
considered in analysis presented to DfT in March 2019.
The tax and advisory firm Grant Thornton peer reviewed the
analysis. It said: “GAD’s methodology and assumptions as
described in the GAD report are reasonable and fit for
purpose given the data and information available”.
Analysis and estimates
GAD actuary Matt Kirkpatrick undertook the research and
wrote the report. He said: “This was an exciting but
complex piece of work which looked to assess a wide range
of motor activity, including new areas of cover where
historical data did not exist.
“With the assistance of a number of industry stakeholders
we helped DfT to examine the impact of several different
policy options and looked at what these could mean for
insurance.
“As part of this actuarial review, we also included
additional analysis relating to the Personal Injury
Discount Rate. This is used to calculate lump sum
compensation payments for high value personal injury
claims”.
