Britain’s motor industry is a ‘star performer’ of the UK economy. Its reported turnover was a record £71.6 billion in 2015. Accepting the benefit that membership of the European Union (EU) has allowed, the industry is understandably nervous about the potential effects of the UK leaving the EU, including big-ticket issues such as exports and attracting and retaining EU talent.
Against the background of uncertainty over future trading relations with the remaining Member States - that may hit inward investment in the motor industry in the UK - we reflect on the key challenges and issues that lie ahead.
Whilst some comfort can be drawn from the promise that extends from the Great Repeal Bill to preserve existing rules that come from the EU, wherever practical, it is evident that the road ahead for UK motor law will nonetheless require careful handling.
Currently, the central planks of the EU legislative framework applicable to the UK motor market are:
- Motor Insurance Directive 2009 (MID) – intended to help EU residents involved in a road accident in another EU country, subscribers to compulsory insurance policies in all EU countries are covered for motoring throughout the EU.
- Vnuk amendment to MID – which extends potential compensation beyond the context of traffic-related motoring following the European Court of Justice (ECJ) decision that compulsory motor insurance applies to any vehicle being used anywhere, for any purpose.
- (Bus and coach) Passenger Rights Regulation 2011 – aimed at preventing discrimination by bus and coach operators and providing additional rights for passengers on coach services longer than 250km between EU Member States.
- European Communities (Rights against Insurers) Regulations 2002 – forming part of the MID, a claimant can recover compensation directly from the insurer rather than pursuing the policyholder responsible (where there is judgment against the policyholder).
- “eCall” Regulation (EU) 2015/758 – which requires all new cars be equipped with eCall technology from April 2018.
Motor Insurance Directive
The momentous decision to leave the EU could affect drivers in the UK who wish to venture abroad and could potentially:
- Increase the cost of cover for driving abroad
- Cause EU victims of road traffic accidents to lose their rights to a claim.
The Brexit vote sent a clear message in relation to the EU’s four freedoms of people, services, goods and capital. Future deals proposed by the UK may limit the movement of these freedoms across borders and although resisted by central European countries, this could result in the loss of minimum coverage for drivers and tighter checks at borders. Drivers will not be able to travel through EU countries with ease.
The European Commission’s June 2016 consultation, now commonly referred to as “The Roadmap”, sets out four policy options to deal with the ramifications of Vnuk:
- Do nothing.
- Enact at EU level legislation that obliges Member States to set up guarantee schemes to specifically cover purely agriculture, construction, industrial, motor sports or fairground activities if uninsured.
- Amend the scope of the MID to relate only to accidents caused by motor vehicles in the context of traffic.
- Exclude some types of vehicles from the scope of the MID.
The Roadmap reads as though the favoured direction of travel is towards option three – to amend the scope of the MID. This outcome, if established, would be welcomed. By removing the need to amend wholesale the UK’s Road Traffic Act 1988 (which implements the MID into UK law), the right of Member States to set up arrangements at a national level would be respected. Such preservation would include making geographical exclusions in order to better control insurance fraud. The extent to which this proves possible will depend on the precise wording of the amendment to the MID and, in particular, the terms “traffic” and “public access”.
Assuming option three is taken forward, indications are that the earliest that amendments could be made is during the summer of 2017. The energy being spent on the wider Brexit negotiations and other political events this year may make that timeframe ambitious. However, there appears to be a clear political will to consult with insurance companies in a targeted manner. Risk and insurance managers should remain vigilant towards the issue.
The Department for Transport originally consulted on transposing the legislation into UK law and it is likely that post-Brexit a further consultation will take place on whether the UK should continue to follow the regulation.
The eCall Regulation is to be implemented from April 2018. Brexit has the potential to mean that the UK is not required to follow the Regulation and therefore leaves more uncertainty as to whether new cars will be fitted with this device.
Gender neutral pricing
The ECJ ruled in 2012 that insurance companies could not take the gender of drivers into account and prevented insurers from charging different premiums based on gender. This led to increased prices for women and lower premiums for men. Leaving the EU could reverse this as it would mean that the UK no longer chooses to follow this decision.
The likelihood of reverting to the pre-2012 situation is an unknown. Although insurers have favoured removal, consideration would need to be given as to the vast administrative difficulties for insurers caused by the original change in law.
Rights against Insurers Regulations 2002
Post-Brexit, the UK will not be obliged to follow these Regulations and could revoke them from UK law, making it increasingly difficult for claimants to sue against an insurer. This will give rise to more claims against the insured directly.
The UK government has confirmed that it does not want a regulation bonfire, suggesting that it will want to keep current regulatory regimes as intact as possible post-Brexit. This will come with ease for applicable EU regulations where there is a UK equivalent. The MID that was transposed into UK legislation, as well as the firmly established compulsory motor insurance, are likely to remain implemented despite the fact that the UK is no longer bound by the EU directive which started the process.
However, there may be ‘fringe’ aspects that are changed once the UK has left the EU. If so, and as with UK law making in other areas, what we are likely to see is that law making will continue in certain areas (where the UK parliament maintains sovereignty) during the withdrawal phase. However, the focus of such legislation is likely to be on drafting UK law with a view to replacing EU law (enacting it once the UK has left the EU). Similarly, the implications of Vnuk is one area that one can envisage being changed by the UK in the future.