UK: Motor Insurance Following A No-Deal Brexit

Changes to motor insurance in the event of a no-deal Brexit will mean UK citizens will no longer be able to pursue claims in the UK following an accident in an EEA country, resulting in more UK nationals making claims in foreign jurisdictions.

The Motor Vehicles (Compulsory Insurance) (Amendment etc) (EU Exit) Regulations 2019 (the Regulation) rectifies deficiencies in the compulsory motor insurance framework that will arise following the UK's departure from the EU in the event of a no-deal Brexit.

It principally removes the requirements for the Motor Insurers' Bureau ('MIB') to act as a Compensation Body for UK residents injured in road traffic accidents in the European Economic Area ('EEA'), and to reimburse its foreign counterparts in respect of EU27 visitors in the UK who have been compensated by their 'home' Compensation Body following the UK's departure from the EU.

Compensation Bodies and accidents abroad

The role of a Compensation Body is to assist victims of road traffic accidents ('RTAs') abroad if the foreign insurer has failed to appoint a claims representative in the Member State where the accident occurred, or if the foreign insurer or its claims representative has not provided a reasoned response to a claim within three months. The Compensation Body will also act when either the insurance policy for the other vehicle involved, or the vehicle itself, cannot be identified.

Directive 2009/103/EC gives EU citizens injured in an RTA within a foreign Member State the right to bring proceedings in their home country and language, rather than the jurisdiction where the accident occurred. The Regulation will remove this right in the UK from Exit Day.

Following Brexit, if a UK resident has an accident in a Member State and wishes to pursue a claim, this will have to be brought in the State where the accident occurred, against the Member State's MIB equivalent (if the other driver is uninsured or unidentified), the relevant insurer in the Member State or the driver directly.

In the event of a no-deal, if a UK resident is involved in an accident in an EEA country caused by an uninsured or an untraced driver they may not receive compensation. This is because not all EEA countries have an MIB equivalent that pays compensation to non-residents. If a Member State has no MIB equivalent there is the possibility for the UK driver to pursue the uninsured driver directly. However, given the relatively limited prospects of recovery and added complexity, this is not likely to occur frequently. In an attempt to ensure that UK citizens can still be compensated following a no-fault accident in an EEA country the MIB is working to sign agreements with these countries.

The Regulation also removes the Compensation Body requirement from the MIB. At present, insurers based in EU Member States must appoint a claims representative in the UK. The claims representative is responsible for handling and settling claims on behalf of the foreign insurer who appointed it. When the UK leaves the EU, this will no longer be required. As a consequence, without the Regulation, the MIB (in its role as Compensation Body), would handle these additional claims that would normally be handled by the claims representative in the UK. The cost to the MIB in dealing with these claims would be passed onto insurers through a higher member levy, who may then pass this onto motorists through higher insurance premiums. Accordingly, in the event of a no-deal exit and without the Regulation, UK motorists would be paying for RTAs caused by EEA motorists in EEA Member States.

What can we learn?

  • The result of the Regulation will be that more UK nationals will make claims in foreign EEA jurisdictions where the accident occurred, and there will also be more claims being made by EEA citizens in England and Wales. Accordingly insurers will likely see a rise in claims submitted to them from foreign EEA nationals.
  • It is anticipated that legal practitioners will seek to issue relevant claims prior to Brexit to ensure that the claim can be brought in the England and Wales jurisdiction.
  • Claimant lawyers will press potential claimants to submit their claims prior to Brexit rather than delaying, so the claim can be investigated and proceedings then issued, as pursuing a claim in the England and Wales jurisdiction will be cheaper and more convenient for claimants and their legal representatives.
  • UK residents who have already commenced court proceedings against the MIB prior to exit day will be able to continue pursuing their claims against the Compensation Body in the UK.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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