My Lords, these draft regulations will be made under the powers in the European Union (Withdrawal) Act 2018, and will be needed if the UK leaves the European Union in March without a deal. The Government are seeking reciprocal arrangements on motor insurance following our exit from the EU, but in the event of no deal, without that agreement we must ensure we have a functioning statute book.
These regulations amend various domestic legislation to correct deficiencies in the legal framework for compulsory motor insurance which arise as a result of the UK leaving the EU without a deal. The draft instrument seeks to maintain the status quo with regards to compulsory motor insurance, making technical changes to ensure insurance requirements for vehicles
in the UK are preserved, as well as amending redundant references to the UK being a member state. They also remove specific obligations on the UK’s Motor Insurers’ Bureau—the MIB—under the Protection of Visitors scheme, commonly referred to as the “visiting victims” scheme. If these changes are not made, the obligations would remain unilaterally upon the MIB in the event of no deal. These changes come into effect on exit day.
This SI was initially laid as a proposed negative instrument, but we have happily accepted the committee’s recommendations to re-lay it using the affirmative procedure instead, acknowledging its concerns about the impact of these changes on UK citizens.
It may be helpful to give noble Lords some background to the legislation being changed. In 1930, the UK Government introduced a law that required every person who used a vehicle to have at least third- party insurance. Today, compulsory motor insurance requirements are governed at EU level by the consolidated motor insurance directive, which is implemented in the UK through the Road Traffic Act 1988 and subordinate legislation. The amendments in this SI are necessary to uphold motor insurance requirements as they currently stand in the UK, if we leave the EU without a deal.
The instrument also deals with requirements under the codified EU motor insurance directive for member states to make arrangements to allow victims injured in a road accident in an EEA country, other than in their home state, to claim compensation when they return home. This is facilitated through insurance undertakings, with member states appointing in all other member states a claims representative to handle and settle claims by victims injured in accidents abroad.
Each member state must also appoint a compensation body which is responsible for providing compensation in certain circumstances where insurance undertakings, through the claims representative, fail to do so. These circumstances include, for example, where there is no claims representative or where the claims representative fails to provide a reasoned response to a claim within three months. In the UK, the Motor Insurers’ Bureau currently fulfils the compensation body role, and is reimbursed by its foreign counterparts under the motor insurance directive.
The amendments made by this SI are twofold. First, it makes amendments to reflect that, once the UK is no longer a member state, the motor insurance directive will no longer apply in respect of the UK. If we did not make these changes, which relieve the MIB of obligations under the visiting victims’ scheme, the Motor Insurers’ Bureau would be required to continue to reimburse its foreign counterparts in respect of EU 27 visitors injured in the UK. It would also have cost exposure for claims continuing to be made by UK residents injured in the EU, but without being able to seek reimbursement from its foreign counterparts. There will no longer be an obligation under the Motor Insurance Directive on insurance companies based in the EEA to appoint a claims representative in the UK, as is currently required. The Motor Insurers’ Bureau could therefore face the additional cost of handling claims that would previously have been dealt with by
claims representatives from EEA countries. The additional cost burden would most likely be passed on to the bureau’s members through their membership levy; in turn, they could be expected to pass it on to UK motorists through higher insurance premiums.
The proposed change under this statutory instrument therefore relieves the Motor Insurers’ Bureau of obligations under the visiting victims’ scheme and removes the potential cost burden that would fall on the Motor Insurers’ Bureau if the legislation remained as it was. In future, without the visiting victims’ provisions, UK residents injured in a road traffic accident in the EEA will still be able to make a claim, but may need to do so outside of the UK.
The rest of the amendments make technical changes to domestic legislation that are limited to what is needed for the legislation to continue to function effectively once the UK has left the EU. They maintain the status quo in respect of compulsory motor insurance requirements. They also ensure that it remains the case that no insurance checks are carried out for vehicles entering the UK from the EU, and travelling between Great Britain and Northern Ireland.
On Northern Ireland more specifically, the UK Government remain committed to restoring devolution in Northern Ireland, but in the continued absence of a Northern Ireland Executive and in the interest of legal certainty, the Government will take through the necessary secondary legislation at Westminster for Northern Ireland. This SI therefore amends the Northern Irish legislation, which makes provision for Northern Ireland equivalent to the legislation for Great Britain. This has been done in close consultation with the Northern Ireland Civil Service.
In summary, while we are aiming for a comprehensive agreement on motor insurance following the UK’s exit from the EU—we very much hope to get that—these regulations are essential for ensuring that in the event of no deal, the UK’s legal framework for motor insurance is clear and fully enforceable. The rules on compulsory motor insurance are at the heart of the road safety regime and we must avoid any disruption to their proper functioning. I beg to move.
Amendment to the Motion