European Commission Consultation

European Commission Consultation on the Compensation of victims of Cross-Border Road Traffic Accidents in the European Union

MOTOR INSURERS’ BUREAU RESPONSE

The principal function of Motor Insurers’ Bureau(MIB) is to provide fair and proportionate compensation to the innocent victims of negligent uninsured and untraced motorists. It also acts as the UK’s Green Card Bureau and Compensation Body. MIB is constantly striving to improve the process of claim handling for the innocent victims of accidents with uninsured or untraced drivers whilst ensuring close control over the cost of claims. MIB is funded by all UK authorised motor insurers and hence the cost of claims is funded fully by the premiums paid by all insured motorists.

The MIB welcomes the opportunity to respond to the European Commission’s consultation on the Compensation of victims of Cross-Border Road Traffic Accidents in the European Union.

Executive Summary

MIB supports efforts to ensure that victims of road traffic accidents are compensated quickly and fairly. However, we consider a proportionate response is required, in light of the EC study findings on the issues of compensation and limitation. MIBconsider both the issues of compensation and limitation periods should be addressed throughprovision of improved information for people travelling cross border. We would not support any legislative measures which impact on Member states existing legislative framework or in the introduction of new legal and administrative structures, as we see this as being disproportionate.

We consider that care must be taken when reviewing what is under- or over compensation.MemberState’s own particular economic, cultural and social features contribute to what is seen as appropriate compensation.

No evidence that under -compensation of victims in cross-border accidents is a problem has been identified. The Study which prompted the EC consultation failed to establish whether there was any under or over compensation. The study also found, limitation periods that varied hugely state to state and there might be potential for people to miss out on compensation because of lack of information and or understanding of the implementation period.

The CEPS report Full compensation of victims of cross-border road traffic accidents in the EU[1] acknowledges that cross-border road traffic accidents represent only about 1% of road traffic accidents in the EU. It did not identify what proportion of that number result in the victim receiving less compensation than they would have had the accident occurred in the state in which they are resident.There was no examination of the effect of any incidences of under compensation. In the circumstances we do not think that consideration should be given to a ‘solution’ until there is evidence that a problem exists.

We consider that consumers are able to protect themselves against potential loss arising from a cross-border accident by purchasing top-up insurance products. In additionMIB supports having better information available for those travelling cross border to ensure that they are awareof their entitlements in the event of them becoming a victim of a road traffic accident in another country.

Below we set out ourmore detailed views on the policy options presented for consideration.

Compensation Awards – preferred solution

  • The MIB prefersas the most proportionate response to the concerns raised about compensation awards’ a combination of development of voluntary insurance market-led solutions and better information to increase awareness, Consumers should be able to make informed decision about the level of risk they are prepared to take. We believe that the solution should be a voluntary ‘top-up’ purchased by the consumer to bridge any shortfall in compensation should they be injured in a country other than their home state.
  • MIB supports better information for the consumer about the differences in compensation levels and limitation periods. We believe a website would be the best way of presenting the information in a user-friendly manner, which could easily be updated. Further thought needs to be given as to who would co-ordinate and update the information, though we suggest that an EU body is most suitable.

Comment on other options

  • MIBconsider that the majority of options suggested by the EC seem to be a disproportionate response to issues which affects a very small proportion of people. Some options would also discriminate against victims of other kinds of cross –border injuries,such as claims arising from a public liability and as such create another issue. As the Rome II Study shows, it is very difficult to identify that any one country compensates at a higher level than another country. It is also very difficult to estimate how many victims of cross border accidents rely on the application of foreign law. MIB submits that for these particular issues, option 2 is the most proportionate response in light of the current differences between member states. Each option is discussed in more detail below.

Option 1

  • While MIB generally supports the application of the principle ‘restitutio in integrum’, which is already applied in most member states, we are aware that it is applied and interpreted differently across states and therefore may not be an ideal solution.

Options 3, 4, and 5 – guidelines on recognised compensation items and how to quantify

  • The creation of European guidelines on recognised compensation items are disproportionate responses for this issue. We consider it would be very difficult to establish guidelines, as the level of compensation and therefore the average claim cost vary significantly among Member States. This is due to the different economic standards in the various States and we support the view that it would be extremely difficult to establish an average claim cost according to geographical regions. Eastern European transit countries are also likely to have difficulty keeping insurance premiums at their current levels.
  • Secondly, as pointed out in the EC consultation paper, where minimum standards are set for compensating items, this may not guarantee harmonisation of compensation levels.

Option 7 – introducing a compulsory driver’s insurance

  • The introduction of a compulsory first party insurance needs careful consideration and may present further difficulties. For example, compulsion means that individuals or organisations must purchase insurance in order to carry out a particular activity legally; there is normally no matching requirement for insurers to supply the product. Availability is therefore dependent on the commercial prospects of the product. A lack of supply may leave businesses or individuals in breach of their statutory obligations. Compulsory insurance can also impose costs on businesses and individuals previously willing to carry their own risks. Some individuals may be priced out of the market.
  • How this proposal would benefit cross-border motorists needs careful thought. It could potentially take longer to deliver compensation to the victim. For example before paying compensation to its insured, the third-party insurer would likely want to ensure that it can subrogate the full amount from the negligent party’s insurer. This could build delay into the process. Further, the additional communication between the victim’s and negligent party’s insurers could increase litigation costs and make the cross-border compensation process even less efficient.
  • For these reasons, MIB believes that the issues identified by the EC may more appropriately be addressed by option 2.

Option 8 – Direct Settlement with own third party liability insurer

  • The MIB view is that this type of claims settlement procedure may not address the concern of over/under compensation, because the law of the country of accident would still have to apply to the claim even if the victim receives compensation directly from his Motor Third Party liability insurer.
  • MIB is still of the view that the issues identified by the EC may more appropriately be addressed by option 2.

Limitation Periods – preferred solution

  • MIB supports Option 2, to provide better information to those involved in a cross-border accident, possibly through the same or similar mechanism as for the compensation awards as previously stated. We consider this the most proportionate response, particularly as the study concluded that there was no identified impact of the differing limitation periods. It is recognised that there was low awareness about limitation periods.

MIB provides more detailed comment about the other options below.

Option 1

  • MIB considers that better information could be made available to ensure that any potential impact is mitigated.

Option 3

  • MIB does not agree with this option, as motor third party liability insurers should not be responsible for providing information about limitation periods, as this is more a role for legally qualified persons.

Option 4

  • MIB does not consider this is the most effective solution for the issue of creating awareness of limitation periods. A rule for setting the time frame within which the claim must be presented to the visiting insurer or claims representative would only be effective, if all victims can be informed of such a rule. It may also have the contrary effect that people miss the limitation period if they are not aware of this rule. It is a further layer of complexity.

Option 5

  • MIB is of the view that this solution would be disproportionate to the problem and may create a discrepancy between victims of cross border road traffic accidents and victims of national road traffic accidents and victims of other kind of accidents.

Options 6, 7, 8 and 9

  • MIB does not support option 7 8and 9, for the same reasons as outlined for option 5.

Conclusion

MIB supports better information for consumers who travel cross border with respect to compensation levels and limitation periods. We consider that this would best sit with an EU body as the most appropriate medium of information probably by means of a website. MIB also believes that the development of innovative insurance top up solutions can help the consumer mitigate their own risks in this situation.

[1]See accessed 18 May 2009