This is the new arrangement at MIB as part of the changes introduced to the Uninsured Drivers Agreement and Untraced Drivers Agreement between the organisation and the government. The changes are taking effect starting this month.
“The new arrangements come into force for accidents occurring on or after March 01, 2017 and there are several important changes that have been made from the previous 2003 Agreement,” MIB chief technical officer Paul Ryman-Tubb said in an email.
The 2003 Agreement excluded compensation for property damage for victims of accidents caused by untraced and uninsured drivers when the claimant’s vehicle was also uninsured. The changes introduced, however, remove this exclusion, allowing uninsured victims to make a claim against the MIB.
“This amendment means that a claimant will have the same rights to compensation for property damage as for ordinary claims, irrespective of their own insurance position,” said law firm Hill Dickinson LLP legal director Michelle Reilly, who worked in the insurance industry for a decade.
“However, this particular amendment has been criticised in some circles for going too far for allowing people who have not paid for insurance themselves the right to compensation for property damage from a fund subsidised by insurers.”
Higher levy on insurers, increased premiums?
The MIB is funded through a levy – £244 million in 2016 – on all companies offering motor insurance in the UK. Reilly believes that the new compensation setup could lead to a rise in claims against the MIB, which may need extra cash by means of the existing levy on insurers over the course of time to meet the increased cost. This in turn is likely to hike premiums for insurance paying motorists, she said.
“This is because the new and updated agreements make it easier for claimants to pursue compensation following accidents caused by unidentified or uninsured drivers,” Reilly told Insurance Business. “Many of the pre-existing procedural hurdles have been removed or simplified, improving access to justice for many claimants.”
“For the first time, claimants who are themselves uninsured will be able to claim for property damage as long as they also have a claim for significant personal injury – the threshold for which has been lowered.”
Reilly, who has over 20 years’ experience dealing with fraud and technical claims, went on saying: “We anticipate an increase in the number of uninsured drivers, who may see the changes as reducing the risk to them. We also expect an increase in fraudulent claims from uninsured claimants.”
Ryman-Tubb told Insurance Business that the changes to the Untraced Drivers Agreement will not affect the levy on insurers for 2017 since it was set in autumn 2016.
‘Crazy’ payouts to comply with EU rules
In a previous news release, the MIB said compensating uninsured claimants was “counter-intuitive.”
“While we will deal with these claims in a professional manner, the principle of using honest premium paying motorists money to pay for the damage to an uninsured driver’s car seems crazy,” Ryman-Tubb said.
In a past report by the Daily Mail, Transport Secretary Chris Grayling said “it cannot be right that hardworking, law abiding drivers will foot the bill for the irresponsible actions of those who decide to break the law and drive without insurance.”
According to Ryman-Tubb, there were various reasons for the changes to the Untraced Drivers Agreement, but some had been implemented “because the Government was of the view it was necessary to ensure compatibility with European law.”
Grayling also told the Daily Mail: “As a result of European law, the Government is forced to make these changes to the compensation paid out by the MIB. We are bound by our EU obligations – but we are leaving the EU and we will want to come back to this.”