European Community (Motor Insurance)

– in the House of Commons at 9:28 pm on 31 January 1983.

Alert me about debates like this

[Relevant Reports of the European Legislation Committee

23rd Report Session I980–81—HC 32-xxiii para. 1

18th Report Session 1981–82—HC 21-xviii para. 2

7th Report Session 1982–83—HC 34-vii para. 1]

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey 10:12, 31 January 1983

I beg to move, That this House takes note of European Community Documents Nos. 9747/80 and 5326/82 about a draft Second Directive on the Approximation of the Laws of Member States relating to Insurance Against Civil Liability in respect of the use of Motor Vehicles; and supports the Government's intention of welcoming the proposal in principle while seeking improvements in detail. I am glad to open the debate that has been arranged to accord with the recommendations of the EC Scrutiny Committee that the draft directive raised important matters of policy and principle and should therefore be further considered.

This is a fairly modest proposal that does not seek full harmonisation of compulsory motor insurance law throughout the Community, but rather seeks to provide for a minimum level of protection for third parties which member states will be free to exceed if they so desire. We believe that that is the right approach as it eliminates the more serious shortcomings while maintaining high standards where they are already established.

Some harmonisation has already been achieved by the first directive, but with a different objective. That was designed to abolish insurance checks on visiting vehicles from other member states, especially at frontiers where green cards were previously normally checked. In order to safeguard the rights of third parties, the directive required motor insurance policies issued in a member state to provide the minimum insurance cover required by the law of the other member states. It also relied on an undertaking by the national insurance bureau of each member state, for vehicles based in its territory, to pay due compensation in respect of compulsorily insurable liabilities incurred by them in other member states, even where they were uninsured.

While the first directive has successfully removed a barrier to the free flow of motor traffic—indeed, the arrangements have been extended to Austria, Czechoslovakia, Finland, the German Democratic Republic, Hungary, Norway, Sweden and Switzerland—the new directive seeks to improve the level of protection for victims of accidents throughout the EC, whatever the origin of the vehicle.

The most significant effect for this country is that we should have to extend our compulsory insurance law to cover liability for property damage as well as liability for personal injury and to provide guarantees in cases of damage where the driver responsible was uninsured. We have not hitherto considered that such measures in the United Kingdom would be justified. In the first place, policies issued in the United Kingdom almost invariably cover liability for both injury and damage. By itself, therefore, an extension of the insurance requirement would achieve little—except for a handful of policies which are for the minimum only. Moreover, most owners already insure their property and if they cannot recover from someone else they can turn to their own insurance. The scale of loss in property damage cases is very much less than for personal injuries.

On the other hand, there are cases in which property owners—mainly motorists—suffer loss because the negligent driver is a man of straw and has failed to insure at all, or if he has, may be in breach of some policy condition—for example has failed to report to his insurer. Even if the owner is insured against own vehicle damage he will often suffer a loss of no-claim bonus. Or the damage may have been caused by a hit-and-run driver. It is argued that it is inequitable that the vehicle owner should not be protected against the irresponsible driver in the same way as those who are injured.

I should explain that injured victims are fully protected in this country by a combination of provisions in the Road Traffic Act, which void various policy conditions as against injured third parties, and our agreements with the Motor Insurers Bureau which guarantee compensation when the driver is otherwise uninsured, or when he is untraced. The real issue for us is whether similar safeguards should be introduced for property owners.

We are inclined to the view that it would be right to extend our law, including the voidance clauses of the Road Traffic Act, and the MIB uninsured drivers' agreement to liability for property damage. But because of the very real possibility of serious abuse, we do not think we can provide for damage allegedly caused by an untraced driver. This view accords broadly with those we have consulted on the draft directive and with the recommendations of the Committee in another place.

I turn now from the general issue to the particular articles of the draft directive. Article 1(1) would require compulsory insurance against liability for personal injury and property damage throughout the Community. I should mention, however, that article 3(1) of the first directive allows for the scope of the requirement to be limited, and insurers have suggested that there should be no requirement to insure goods in transit. This restriction applies in other member states and it is argued that insurance of such goods is normally taken out under a different policy from that of motor insurance, and that if it was made compulsory there would be confusion and difficulty in dealing wiih claims. Some policies exclude damage to property such as bridges, viaducts and roads caused by vibration and weight. Also, there may be problems associated with vehicles such as mobile cranes or mechanical excavators operating off road but causing damage to third party property on a road. We shall need to consider those possible exceptions and would welcome any views.

Article 1(2), which was the subject of our supplementary memorandum, specifies minimum limits of compulsory insurance, or in other words the floor for cover throughout the Community. It would certainly cause no problems for the United Kingdom as we already require unlimited cover for liability for personal injury. Private motorists have unlimited cover for property damage but for commercial vehicles there is normally a limit of £250,000, well in excess of the minimum in the latest proposal. This article would benefit United Kingdom motorists who rely on the minimum cover when motoring elsewhere in the Community, as in some states this is quite low and they might at present find themselves under-insured.

Article 1(3) provides that a guarantee fund should compensate victims of uninsured or untraced drivers but allows limitation or exclusion of compensation for property damage caused by an untraced driver. That option was included by the Commission following strong opposition to its original proposals. I have already mentioned that we believe that such damage should be excluded from our untraced drivers' agreement. In the uninsured case it has been suggested that, because of the disproportionate extra costs of handling the smaller claims for property damage, an excess should apply, so that if it was under £500, no claims below that amount would be entertained by the bureau and only the net amount of any claims exceeding this sum would be payable. I should be interested to hear hon. Members' views on this proposal.

Article 2 seeks to provide that third parties are not deprived of due compensation because at the time of the accident the vehicle concerned was being used in breach of policy conditions. The objective is laudable, but the drafting is defective as it has a discriminatory effect against insurers of visiting vehicles from another member state. For that reason, it is not acceptable to the vast majority of the members of the green card system, which provides the guarantees on which the first directive relies. We shall therefore press for this article to be revised.

Article 3 would abolish exclusion, allowed in some other member states, of members of the family of the policyholder from the scope of compulsory cover. The article would be of benefit to British motorists since it removes a potential hazard where, if he has only the statutory minimum insurance, it would not cover members of his family in any accident for which he was responsible. That position cannot arise in the United Kingdom now and will not arise abroad in future once the directive has been finalised.

Article 4 redefines the territory in which a vehicle is normally based for the purposes of the first directive as the territory of the state of which the vehicle bears the registration plate. It seeks to avoid disputes and in our view is unobjectionable.

Article 5 deals with timing and we must, of course, ensure that a sufficient period is allowed for the necessary statutory processes and for changes in insurers' procedures and documentation.

I can sum up that rather formal description of the directive by saying three things. First, the directive will provide a better deal for Britons travelling abroad because it raises the standards of compensation for both personal injury and property damage. Secondly, it will provide a better deal for Britons whose cars are hit by traceable EC cars. They will receive compensation from the European Community motor insurance bureau of the country to which the vehicle belongs. Thirdly, it will provide a better deal for Britons whose cars are hit by traceable British cars, because the Motor Insurers Bureau will ensure that they receive compensation.

I commend the draft directive to the House in principle and propose to press for any improvements that we consider necessary.

Photo of Mr Roger Stott Mr Roger Stott , Westhoughton 10:21, 31 January 1983

This is a small but important measure, and I thank the Minister for her full and lucid explanation of a rather complicated European document. I concur with what she said about the benefits that would accrue to United Kingdom drivers from the provisions about property and the Motor Insurance Bureau. In many ways the provisions in the document concur with the views that my right hon. Friend the Member for Barrow-in-Furness (Mr. Booth) and I hold about motor car insurance. I shall not detain the House for long this evening because we need not discuss the matter at great length. The Minister described the consequences of the directive and, on balance, its provisions are sensible.

However, in passing, I draw the House's attention to the document that accompanies the provisions announced by the Minister. I do not know whether hon. Members have the document from the European Community that sets out in detail what the provisions entail. I am interested in the semantics of the document, especially because I have never viewed the European Community with great enthusiasm and I have had serious doubts about whether we should be a member of it. I realise that this is not the time to deploy those arguments, but it is important for us this evening to consider, albeit briefly, the wording of the draft document.

Paragraph 2 on the second page states: The Commission does not consider it advisable to allow the Member States, as both Parliament and the Economic and Social Committee requested, to fix an excess below which the guarantee fund would not pay compensation. That is a very striking phrase: The Commission does not consider it advisable". One can only conclude that the Commission is completely overruling the European Parliament and the economic and social committee in respect of their request to fix an excess below which the guarantee fund would not pay compensation.

The following page has this to say, in paragraph 4: In deference to the views expressed by Parliament and the Economic and Social Committee, the Commission has amended Article 3". Paragraph 5 says: The Commission has also"— in a benign and giving way— acceded to Parliament's request that longer periods be allowed under Article 5". The parody continues in the following paragraph: The Commission, did not, however, adopt the amendment to Article 4 proposed by Parliament and the Economic and Social Committee". Although the document contains proposals that I cannot advise the House to oppose, it demonstrates clearly the view that I have held for many years that the European Commission is a law unto itself, a non-elected bureaucratic body that easily overrides the European Parliament and its committees, although the latter look at these directives and make recommendations on them.

Photo of Douglas Hogg Douglas Hogg , Grantham

I am sure that the hon. Gentleman would also wish to make the point that the directive in its present form constitutes only proposals, and whether or not these proposals become law depends on the decision of the Council of Ministers, and that Council will comprise at least one Minister from this country who is accountable to Parliament.

Photo of Mr Roger Stott Mr Roger Stott , Westhoughton

That goes without saying. The hon. Member for Grantham (Mr. Hogg) says that all legislation, or all laws, that emanate from the European Community have to be passed by the Council of Ministers. My argument—it is a tenuous one—is that the Commission has the audacity to use language such as "In deference to … Parliament". It objects to Parliament's view. It disagrees with Parliament's view on this, that, and the other. This reinforces my clearly conceived idea that the European Commission is a non-elected bureaucratic body that seeks to impose its will on this House of Commons, and the European Parliament is totally disregarded in almost everything that it does.

Notwithstanding that little aside—the road that you, Mr. Deputy Speaker, graciously allowed me to wander down—the provisions of the document are sensible. The document's proposals are not earth-shattering, but they are significant. For that reason, we welcome them. I note the Minister's initial remarks, that the proposals are worthy of consideration, but that they are not the final view of the Government and may need to be refined at some stage in the light of our experience. We therefore give these proposals a fair wind.

Photo of Douglas Hogg Douglas Hogg , Grantham 10:29, 31 January 1983

Like the hon. Member for Westhoughton (Mr. Stott) I welcome the draft directive. It should be welcomed on two grounds. First, it is highly desirable that the House should provide that property damage forms part of the compulsory insurance cover afforded to all United Kingdom drivers, and indeed third parties. Secondly, it is highly desirable that we should have a uniform system of minimum insurance cover backed by a guarantee fund. In that letter regard Britain is entitled to draw attention to the fact that for the most part the Motor Insurance Bureau agreement, which has underwritten claims of this kind, has set the pace for other countries to follow.

Although I welcome the draft directive, I should like to make three points. First, we are dealing with minimum cover. I have looked at the draft directive and I see that in respect of a single accident involving one victim the minimum cover is set at 350,000 ecus or just over £200,000. I suggest that that level is too low and it is even lower when one has regard to a single claim involving several victims, because then the minimum cover is 500,000 ecus, which is around £295,000.

The cover required on the part of drivers should be unlimited. There are two reasons for that. If one has regard to the awards that are being made in the courts one sees that, partly as a result of inflation and partly as a result of the more generous interpretation that courts have placed on loss of earnings claims, we are seeing claims of £300,000 plus in the High Court. It is slightly unsatisfactory that the House should put a minimum level below that which is increasingly common in English courts. Therefore, there is a strong argument for saying to the Commission that we should either not have a lower limit at all or that the present lower limit is too low, especially in the case of the 500,000 ecu lower limit in the case of several victims arising out of one claim.

Photo of Douglas Hogg Douglas Hogg , Grantham

I am glad to see that the hon. and learned Gentleman also takes that view.

My second point relates to property damage, and on that I am glad to say that I agree entirely with the point made by my hon. Friend the Minister. It would be undesirable that, in the case of unidentified drivers, a person should have a claim on the fund or, for United Kingdom purposes, on the MIB. The draft directive gives Britain the right to exclude a claim for such damage and I welcome that. We are contemplating damage caused allegedly by a driver who cannot be identified, but that raises the interesting question in many instances of whether the damage was in fact caused by the driver who makes the claim or by some unidentified driver who cannot be identified. It would be jolly difficult to determine liability in such a case because it would be easy for a driver who had left the road and smashed his car, with serious personal injuries, to say that somebody else caused it by driving towards him, without hitting him, and had then gone away. There would be great problems in determining liability, especially in a case of damage only. I welcome what my hon. Friend the Minister has said in this regard. We should exclude such damage in so far as non-traceable drivers are concerned.

Thirdly, and it may that this point is already met by the practice and conventions of the EC, I would regard it as desirable that non-EC countries should have the right to opt into this kind of agreement. That could no doubt be done by non-EC countries subscribing to some convention which incorporated the overall terms of this agreement, it being made reciprocal as between the EC and the non-EC country that wishes to opt into the system. It is obviously desirable for our citizens that they should have minimum protection throughout Europe, whether or not they are driving in EC countries.

If there is a mechanism under which non-EC countries can have reciprocal obligations and rights, I am in favour of it and I hope that the Minister agrees.

Photo of Mr Edward Lyons Mr Edward Lyons , Bradford West 10:35, 31 January 1983

We are discussing an important matter. Britain is in the process of moving towards compulsory insurance to cover property damage. At present, if a driver's car is written off because of the negligence of an uninsured driver, he has a claim against that uninsured driver personally, but if that driver has no money or assets, compensation is impossible to recover.

Recently one of my constituents was involved in a case which illustrates the need for the new directive. He borrowed his brother's car and collided with a car driven by an uninsured person. The uninsured driver was guilty of negligence and judgment was given in the local county court. The uninsured driver did not pay. The Motor Insurers Bureau is not responsible for property claims against uninsured drivers. The car was a write-off, and my constituent had to compensate his brother for the value of the car out of his own pocket. He paid his solicitors to sue the uninsured driver. My constituent had to pay his solicitors for pursuing the negligent, uninsured driver. Every time his solicitors tried to enforce the judgment and obtain costs, more costs were incurred. My constituent is substantially out of pocket.

Britain is the only country in the EC which does not have compulsory property insurance in such circumstances. It is to our shame. People talk of the advantages and disadvantages of being in the EC. This is an example of an advantage because we are being pushed into what EC countries have done for years. In future, a man whose car is written off in the way that I have described by an uninsured driver with no assets will be able to recover compensation from the Motor Insurers Bureau. That is a major, desirable change. When will the necessary legislation be introduced?

The provision could be wider and include liability for the Motor Insurers Bureau, financed by our insurance companies, to pay compensation in respect of damage not only by an uninsured driver, but by the driver who cannot be traced.

We must bear in mind that any extension of compulsory insurance will lead to higher premiums. The inclusion of untraceable drivers will result in increased premiums, because a person who has suffered damage through his own negligence might be tempted to claim that the damage was caused by an untraceable driver. The whole system would be open to abuse. Accordingly, although with some regret, I take the view that the untraceable driver should not come within the scope of the proposals, and there is provision for Britain not to have to follow such a lead.

The limits on compensation in Europe seem to me, on the whole, reasonable in respect of property, although I agree with the comments of the hon. Member for Grantham (Mr. Hogg) about limits in relation to personal injuries. The limits proposed in the draft directive are higher than hitherto in the various countries and, as such, are to be welcomed as a substantial improvement on the present position.

In Britain, however, there is no limit at all in relation to personal injuries. In other words, when a driver takes out the compulsory third party insurance, he knows that the insurance company has imposed no limit in respect of any personal injuries caused by the driver. I therefore agree that the Government should press for higher limits abroad.

Nevertheless, the new proposals are a great leap forward, and I am greatly encouraged that we can point to this positive advantage resulting from our membership of the EC.

I noted the comments of the hon. Member for Westhoughton (Mr. Stott) about the language used and the alleged arrogance of the Commission, but everyone knows that the Commission has virtually no power in relation to the Council of Ministers, which is composed of Ministers from national Governments responsible to national Parliaments. Indeed, it is because Governments are supposed to be responsive to their national Parliaments that this debate is taking place today.

We all know that if the Government do not agree to what is proposed by the Commission, or indeed by the European Parliament, nothing will happen. It is pure myth nowadays to make out that the Commission has great powers. Once upon a time it had such powers, but the Council of Ministers representing national Governments has relentlessly taken power from the Commission. Furthermore, it will not allow the European Parliament to have any reasonable power for fear that national Governments will suffer a diminution of their powers as a result.

What we now have is a Europe governed not on European or international principles but by national Governments out of considerations of self-interest. In this instance, however, it is clearly in our national interest to support the directive. It is in the interests of motor vehicle consumers in this country to have a directive of this nature and the legislation to operate it. I wish it godspeed on behalf of the Social Democratic party.

Photo of Mr Roger Moate Mr Roger Moate , Faversham 10:43, 31 January 1983

I apologise for not having heard the remarks of my hon. Friend the Under-Secretary of State in opening the debate. I hope that she will forgive me if I raise any matters that she has already adequately dealt with.

First, I find myself in the unusual position of defending the European Commission. In this case, it seems to be directly answerable to the Council of Ministers, which is responsive to this Parliament. I certainly prefer that arrangement to giving any additional powers to the European Parliament. Indeed, I was surprised that the hon. Member for Westhoughton (Mr. Stott) sought to elevate the role and significance of the European Parliament.

Photo of Mr Roger Stott Mr Roger Stott , Westhoughton

That was not my intention. I said that this confirmed my view of the European Parliament as a completely neutered body, as I had always believed it to be.

Photo of Mr Roger Moate Mr Roger Moate , Faversham

I agree with the hon. Gentleman in that respect. Especially when one considers the rather futile nature of the elections on which the European Parliament is based, it is clearly unresponsive to anyone. The Commission at least is responsive indirectly to this house, and this is a good example of an occasion on which the House is being asked, in a manner of which I entirely approve, to give its approval to a draft directive.

I commend the motion before the House and thank my hon. Friend for its wording. It specifically asks the appproval of the House for the Government's intentions. So often we have complained about take note motions which are unamendable and do not give the House an opportunity to express its view. In this case, we have been asked to support the Government's intention of welcoming the proposal. It is a proper way in which to proceed.

I should like also to welcome the improvement in the personal injury arrangements throughout the Community. It has been unsatisfactory in the past, and remains so to a certain extent, that there have been such inadequate levels of personal injury compensation in many Common Market countries. Because of these considerable variations, British motorists have still had to take out additional insurance cover, as described in their green card, when they travel in Europe. Years ago, we thought that that would be unnecessary and would be ended, but still today a motorist going abroad is wise to take out extra green card insurance. It is not a legal requirement although many think it is, but it is advisable because the level of compensation in many European countries is inadequate. Now, it will probably be adequate but not to the extent that it is unnecessary now to have some form of additional cover. I should like my hon. Friend to say what she sees as the practical implications for the British motorist travelling abroad in future once the British regulations are introduced.

In practice, in Britain, the British motorist will still have unlimited liability for personal injury. When he or she travels abroad there will still be the limits laid down in the document as the minimum requirement. In practice, will the British motorist still require to take out extra cover on a green card when he travels abroad? We think that it is important to give guidance to the motorist about the future position. I agreed very much with my hon. Friend the Member for Grantham (Mr. Hogg). The limits are important to the Community politically but not to the motorist taking a holiday. It would be so much more desirable if one could extend these international arrangements to cover all the countries of Europe. It would not require a great initiative by the Government to see whether this could be extended to those countries such as Spain which are not yet members of the Community but might well be, and other countries, which will not be, such as the Scandinavian countries and Switzerland.

This has been a remarkable debate. This thinly attended House is accepting the principle, a reasonable principle, that the Road Traffic Act should be extended to include property damage. It is remarkable because the House over the years has accepted as a matter of major principle the limitation of personal injuries. Some years ago there was a hotly argued and hard-fought Bill to extend that personal injury to include passenger liability. It took a special Act of Parliament and three years of argument to achieve. Yet tonight, almost as a matter of course, we are throwing in property damage with hardly any debate or controversy. It is a matter of major importance and in the end, someone has to pay for it. The motor insurers bureau will pay those claims, but of course that has to be paid for by the insurance companies, and that in turn will come out of insurance premiums. I suspect that it might be a matter of far greater significance than might be suggested by the rather perfunctory nature of the debate. It could be expensive and many people could in equity receive compensation when in the past they could not have done so, but that ultimately will have to be reflected in higher insurance premiums.

It is right that the untraceable driver should be excluded from this legislation, especially in view of the other recommendations that there should be no minimum level for property damage claims. I ask the House to think for a moment about the consequences had that not been so. Untraceable damage—for example, damage caused by lorries to buildings, gates and fences—is familiar to many. There is also damage caused by vibration and the many vehicles that are damaged in car parks. If we included untraceable owners who had caused damage to vehicles we would be introducing a nightmare.

We are debating a matter of considerable importance. It is a step in the right direction. If we have to say "Thank you" to the Community for taking the initiative, against all my instincts I say "Thank you". Let us broaden the measure on a much wider European basis because that, too, will be in the interests of motorists.

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey 10:51, 31 January 1983

By leave of the House. I am most grateful to hon. Members for their comments. I do not want to detain the House for more than a few minutes.

If the hon. Member for Westhoughton (Mr. Stott) does not understand now about translation from one member state's language into another member state's language and does not realise that the formality of the language is no worse than the way in which the language of the House so often appears to the ordinary man in the street in United Kingdom Ltd., I am surprised at him. The hon. Gentleman was trying to find something to say. He knows what is going on. The hon. and learned Member for Bradford, West (Mr. Lyons) was right to tease the hon. Gentleman about that.

I am glad that there has been a welcome for this measure. I believe that it will be of great benefit to British motorists. My hon. Friend the Member for Grantham (Mr. Hogg) and the hon. and learned Member for Bradford, West spoke about minimum cover and both felt that personal cover was inadequate. An improvement is being made and I am sure that it will be possible to bring other countries up to the same standard stage by stage. It is important to move as fast as we can towards a more satisfactory situation for motorists driving in and out of one another's countries, especially in Europe.

In my earlier remarks I referred to the first directive, which successfully removed a barrier to the free flow of motor traffic and detailed the extension of the arrangements to other countries outside the European Community. The new directive seeks to improve the level of protection for victims of accidents throughout the EC and it may be able to be extended. I am sure that many countries will want to consider that. If there is anything further to report to hon. Members who raised the issue, I shall write to them.

I am grateful to my hon. Friend the Member for Grantham, who gave me his definite support for the exclusion of untraceable drivers. If we were to be forced to include untraceable drivers, the cost of insurance really would increase. My hon. Friend the Member for Faversham (Mr. Moate) has made history this evening in welcoming the directive. I can tell him that the insurers estimate that the effect on premiums of this measure will be negligible. It will mean also that our motorists will be better compensated if they should be involved in an accident that includes property damage.

The hon. and learned Member for Bradford, West asked when all this would come to pass. The measure will probably become effective next year. A number of stages have to be completed and I wanted the views of the House before the final direction is put forward.

I was asked about the need for the green card. It will be some time before the directive will be finalised and it is always wise for a motorist to check with his insurer before going abroad.

I am sure that my hon. Friend the Member for Faversham will underline that, with his experience of the insurance industry. It must be up to the individual motorist to decide what level of cover he wants, even though the directive establishes a minimum. There may be circumstances that demand higher than the minimum cover. It is advisable to take out a green card extension to cover other risks in a domestic policy—for example, own vehicle damage, when nobody else is liable. A British motorist who goes abroad may have an accident that involves no other vehicle and damages nobody else but his own vehicle is damaged. That can be covered adequately by a green card extension.

I shall not repeat the positive advantages to British motorists. I said all that at the beginning. I think that we all welcome this Community initiative as an opportunity to widen the scope of our system to include material damage and to take advantage of some harmonisation that will benefit all motorists in the Community.

Question put and agreed to.

Resolved,That this House takes note of European Community Documents Nos. 9747/80 and 5326/82 about a draft Second Directive on the Approximation of the Laws of Member States relating to Insurance Against Civil Liability in respect of the use of Motor Vehicles; and supports the Government's intention of welcoming the proposal in principle while seeking improvements in detail.