Terror risk mutualised: amendment to Article 75 vehicles
As the inquests for the terrorist attacks in Westminster and London Bridge move through their preliminary stages motor insurers have acted to mutualise the risks.
The terrorist attacks in Westminster and London Bridge in 2017 brought into focus the previous amendment to the Article of Association, that resulted in the insurers involved facing the claims rather than the Motor Insurer Bureau (MIB). The attacks in London are two examples of a mounting number of rental vehicles being used in attacks on public spaces, and part of a wider rise of low-tech terrorism.
Indeed, according to Pool Re’s latest report into terrorism in the UK, vehicles accounted for 18% of fatalities in the latest 10-year cycle (amounting to 99 deaths). They caused only a single death before the 2010s.
It is likely to only be a matter of time before a privately owned vehicle is used in such an atrocity, and ostensibly there seems little that can be done to avoid vehicles being used in such a way.
Amendment to Article 75
The motor insurance market signalled that it was right to consider if individual insurers or the market as a whole should carry the risks associated with motor claims arising from terrorist attacks.
More than 75% of motor insurers by voting rights agreed the change, following a 28-day ballot which closed on 19 July. As a result, Article 75 has changed to bring these claims within the scope of the claims paid by the MIB.
The decision follows the February 2018 MIB consultation with insurers to consider whether to amend Article 75. Consideration was given as to whether such unpredictable acts of violence should be borne by the market as a whole (through the MIB central fund) or by an individual insurer who happens to have insured the vehicle involved, but clearly not for terrorist purposes.
A political issue?
At a time when the government is scrutinising the savings being passed on to the public by the whiplash reforms, the question posed by the MIB of whether it is correct for costs arising from acts of terrorism involving the use of a motor vehicle fall to the insurance industry, and motorists through insurance premiums, while the costs of other terrorist attacks would fall on the state, is a pertinent one.
It could be argued that there is a two tier level of compensation payments being made. The lower tier would be paid in a non-motor context through the Criminal Injuries Compensation Scheme. A claim paid by an insurer/MIB would almost certainly be higher. Will this disparity see those representing proposed claimants develop innovative arguments to at least try and place the claim at the door of the insurer/MIB?
The usual point of sale checks are unlikely to raise any concerns about a terror risk. If a potential terrorist has avoided the scrutiny of the security services, then even the most refined process is unlikely to generate a red flag of any kind. Insurers with a high percentage of 4x4 or SUV’s are perhaps at greater risk, as arguably they can cause even more damage than a transit van, as used in London Bridge.
Heavy vehicles such as snow ploughs or large container or tanker vehicles would be an obvious target for a potential terrorist intent on causing maximum damage. Does this make vehicle depots a target for terrorists? What security measures are in place to minimise the risk? For large local authorities and logistics companies this must be an obvious area for concern to ensure that whatever theoretical threat is present it is minimised.
From next year, the MIB will, therefore, deal with all third party motor claims where terrorists driving vehicles injure or kill people on or after 1 January 2019.
The change is pragmatic so that any claim should be dealt with by the MIB irrespective of value, rather than the MIB stepping in at a defined level.