The Distance Marketing Directive (DMD) could open the door to an increase in uninsured driving, the Motor Insurers' Bureau (MIB) has warned.
The DMD, a piece of EU legislation that came into effect on 31 October, allows retail customers a cooling off period of 14 days during which time they can cancel a policy without giving any reason.
The change has led to fears that unscrupulous drivers could apply for a policy, cancel it as soon as they receive their policy documents, but use the documents to obtain their tax and MOT certificates.
MIB group chief executive Ashton West said: "This change compounds the need for a new enforcement regime to be introduced.
"Systematic enforcement of the law will highlight and track these kinds of problems. The only question now is when and what model we should have and who should pay for it.
"This is something we are working on at the moment."