Roy Rodger outlines the key points from the CII's Faculty of Insurance Broking Motor Insurance Masterclasses designed for senior brokers

The recommendations for the industry held within the Greenaway Report on Uninsured Driving in UK are currently under debate but it is important that practitioners know about it. For example, brokers handling fleet and motor trade business should be aware of Recommendation 17 dealing with the abolition of open certificates. This could have far-reaching effects on how brokers handle these policies.

Uninsured driving
It is a commonly held view by many in the industry that all uninsured driver claims are dealt with by the Motor Insurers' Bureau (MIB). This is not so.

As a general rule, where there is an insurer involved, that insurer may well be compelled to deal with the third party's RTA claim and then try to recover from the uninsured driver.

The MIB is regarded as "the fund of last resort" and only becomes involved where there is no insurer who is eligible to deal with the victim's claim. MIB claims are dealt with under either the Uninsured Drivers Agreement or the Untraced Drivers Agreement.

Typically, this would cover hit & run cases or where a thief, driving a stolen car, leaves the scene and is never seen again.

Under both procedures, a £300 excess applies to eligible property damage claims.

The total cost of uninsured driving to the honest motorist is estimated at £30 per vehicle, based on the MIB levy, claims that remain with the insurer, and premium lost to the industry.

Motor Insurance Database
Currently, the industry is adjusting to the demands and requirements of advising additions and changes to the Motor Industry Database (MID). Clearly, the procedures favour EDI business over more labour intensive covers. Temporary vehicles, whether, hires, loans or customers' vehicles must be advised if held for longer than 14 days. This and other issues are covered fully in the list of frequently asked questions published on the MID website.

Young drivers and fronting
Recently published statistics showing a comparison of motoring offences by gender and age confirmed that young males committed a disproportionate number of offences.

A survey listed the following factors as being most commonly associated with accidents involving young male drivers:

  • inappropriate speed
  • bends, especially sweeping right handers
  • peer passengers and showing off
  • This puts brokers in a very difficult position but it is important that the customer is aware of the possible consequences of his actions. There is inconsistency among insurers when dealing with fronted cases. Some insurers will void the policy while others will charge retrospective premiums. In the latter case, many of these were never paid and remained outstanding on the broker's account.

    Retrospective premiums send out the wrong message to drivers and only encourage the practice which is just another method of fraud and cheating.

    Driving other cars
    The removal of driving other cars (DOC) has received a lot of publicity in recent months and a number of major motor insurers are in the process of removing DOC from their covers. Biba and other bodies acting on behalf of policyholders have made strong representations against this move.

    Those insurers (and MIB) who are in favour of abolition state that DOC encourages uninsured driving and it is abused by dishonest motorists. Unfortunately, it does not seem that the issue has been thought through clearly.

    First, MID has a DOC flag. If abuse is now a valid reason for removing cover, can we expect to see the disappearance of most travel insurance covers and all-risks cover on household policies? Does it also mean that motor trade policies will be abolished, as they are essentially business DOC policies? How can an insurer state that, by removing cover it will improve the uninsured driving situation? In a market where most personal lines motor policies are written on a named-driver basis, how will the absence of DOC affect private sales where no motor trader is involved?

    Where DOC cover exists, it is important to remember some of its features:

  • Cover is third party (TP) only
  • Cover is usually only given to the policyholder
  • Use-as per the policy
  • The term "motor car" is not just restricted to cars and small vans are included (see RTA 1988 S. 185)
  • Some insurers are introducing restrictions which make using DOC very difficult, for example the DOC car itself must be insured, taxed and MOT'd. Considering that DOC's main use is for emergencies, how will the driver be able to find out this information before he tries to rescue another driver?
  • Days of grace
    Motor insurance has developed with its own version of days of grace, purely due to the requirement to maintain continuous cover evidenced by a Certificate of Motor Insurance. This was important in the days when premiums were paid by cash or by cheque.

    Now, days of grace seem to be no longer necessary. Generally, the market is happy to see them go as there was confusion over what cover operated during the grace period and when the customer was entitled to the cover. During the period, cover is RTA only and the cover only operates if the driver intends to renew.

    What is a matter for concern is that practice may vary as an insurer may retain the period, remove it, or keep different periods for different brands. Clearly, this is a non-competitive area and it is important the market acts together.

    Driving in Europe
    In addition to providing TP, third party fire and theft or comprehensive cover in UK, policies issued to UK motorists must satisfy EU Directives by covering use in most countries in Europe.

    This European cover is expressed as the greater of the minimum cover required by the driver's home country, or the minimum cover required by the country where he is driving.

    This arrangement applies to all EU countries and a number of others, Andorra being a notable exception. Effectively, the car's British registration plate becomes the Green Card in these countries.

    In practice, this minimum cover is rarely used and most drivers will arrange top up cover or may already have an element of Free Foreign Use cover in their policy.

    Motor fleets and motor trade
    The key to a successful presentation is to know the risk and anticipate the underwriter's questions. Any adverse features have to be presented strategically and in context.

    As a minimum, a renewal presentation will include:

  • Report on any trends - do not leave it to the underwriter to spot trends
  • Claims commentary
  • IBNR and run-off report
  • Claims analysis - drivers, circumstances, dates, etc
  • Business activities
  • Where the underwriter is remote from the risk, it is often worth using advertisements, photographs, brochures, and customer lists to demonstrate the status of the client.
  • Risk management
    An effective risk management programme has always paid dividends in terms of accident reduction, but with recent legislation relating to Corporate Manslaughter, it is vital.

    Surveys show there are still only a few firms which have any form of risk management or travel/driving policy. It is important in these cases that brokers work with their clients to install good working practices. IT

    ' Roy Rodger is Faculty of Insurance Broking Motor Masterclass leader at the CII. For more details visit Click