BIBA Response to the Department for Transport’s Consultation on the Minimum Levels of Motor Insurance Cover

18th April 2007

BIBA Response to the Department for Transport’s Consultation on the Minimum Levels of Motor Insurance Cover

The British Insurance Brokers’ Association (BIBA) is the UK’s leading general insurance intermediary organisation. We represent the interests of insurance brokers, intermediaries and their customers, and have partner members of the leading companies in the insurance industry.

We are pleased to have the opportunity to respond to the Department for Transport’s consultation on the minimum levels of motor insurance cover. We are responding on behalf of our collective membership who have contributed to this submission.

BIBA’s responses to DfT’s questions are as follows:

  • Do you prefer option 1 or option 2?

As insurance brokers we welcome the proposed increase in the compulsory Third Party Property Damage limit to protect our clients. The current minimum requirement (for which the UK level is £250,000) is considered extremely low and indeed most insurers offer much higher limits under current contracts, typically £5million for commercial vehicles and £20million for private cars. The proposed new limit should not therefore cause motor insurers too many problems, although we acknowledge some impact in circumstances where policies respond only in terms of the minimum statutory requirement and also in respect of claims handled by the Motor Insurers’ Bureau.

We feel that Option 2, with a level of £1.5 million, offers better protection to Policyholders and third party victims and this is therefore our preferred option. As the Consultation Document states, this would also provide a level of stability in the UK insurance market, as the automatic increases required under the 5 th Directive would not breach the new limit for some considerable time.

As already stated, this may impact on insurance contracts where the property damage limit is currently limited to the minimum requirement, for example a restriction relating to the carriage of hazardous goods. There are also implications for property damage claims caused by uninsured drivers that the MIB have to deal with up to the statutory minimum requirement. However, we believe that the impact in each case will not be any more significant were the limit to be £1.5million rather than £1million. As the former offers greater consumer protection, this is BIBA’s preference.

  • Are there any other levels you would like the Government to consider?

No BIBA are satisfied that the level of £1.5million is sufficient.

  • Are there any other costs or charges which might arise as a result of the proposed change?

As mentioned in response to question 1, there could potentially be an increase in property damage claims handled by the MIB, whereas previously the requirement was capped at £250,000, the cap could now be £1.5million. Otherwise, we do not believe there are any other significant costs or charges which might arise as a result of this proposed change.

Thank you for taking the time to consider our response. If you have any further queries please contact BIBA’s technical services manager Graeme Trudgill for further information on 02073970218 or [email protected].

Yours sincerely

Eric Galbraith

Chief Executive
Direct Tel: 020 7397 0201
Direct Fax: 020 7626 9676
[email protected]