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.
- a negative effect on motor sports, classic cars and mobility scooters;
- enforcing the wider requirements would be difficult and complex;
- a potential need to amend the Statutory Off-Road Notification (SORN) scheme; and
- a likely increase in claims fraud and therefore in premiums.
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.
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:
- There would be no recourse to the MIB for victims of uninsured or untraced vehicles where insurance is no longer required as a result of the changes effected by the bill.
- If a vehicle is used in, or normally based in, EU member states or Northern Ireland, it would still be required to have the level of cover mandated by EU law, if that is higher than the UK
- The bill does not have retrospective effect, so, for example, would not affect the interpretation of the Road Traffic Act 1988 until the day it came into force.
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.
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”.
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 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.
- Debate on ‘Motor Insurance: Court Judgments’, HC Hansard, 22 September 2021, cols 172–86WH
- Paul Ryman-Tubb and David Holt, ‘Vnuk—the final chapter?’, Weightmans, 6 January 2022
- House of Commons Library, The Cost of Motor Insurance: Impact of the Vnuk Case, 24 September 2021
- Harry Yorke, ‘Drivers to pay extra £50 for insurance because Government has failed to slash “pointless” EU rules’, Telegraph (£), 8 October 2021