REFIT – The ‘last chance saloon’ for avoiding Vnuk chaos

Nick Robbins, Head of Market and Public Affairs for MIB discusses one crucial aspect of the long-awaited review of the Motor Insurance Directive launched by the European Commission back in July.

In 'Brussels speak' the process for reviewing the Directives is called “REFIT”, which is part of the EU’s better regulation programme. On their website the Commission state that the aim of REFIT is to make “EU law simpler and less costly” and also to “remove unnecessary burdens”. For the most part, certainly from the MIB’s perspective, the Motor Insurance Directive works well and does not need wholesale change. This article considers the timelines and a key area of interest to us: mitigating the effects of the Vnuk judgment.

Timelines

Often a REFIT review of an EU Directive is a slow process, sometimes likely to take several years to complete from inception to conclusion. However, in this instance the Commission issued an Inception Impact Assessment to introduce their review of the Motor Insurance Directive on 24 July, followed just a couple of days later by the launch of a full consultation. Moreover, the Commission’s stated aim is to conclude the whole process by the end of 2017. This is an unusually short and challenging deadline, especially when one gets into the detail of the proposals.  Whilst it is unlikely that the Commission will conclude the process as quickly as the end of 2017, their ambitious roadmap shows a statement of intent to complete the process as soon as possible.

The consultation process ends on 20 October. After this, the Commission will consider responses and propose amendments to the Directive for Member States and the European Parliament to consider.

The Commission has highlighted several areas where they believe change may be necessary and a crucial issue is the need to amend the Directive to ameliorate the impacts of the Vnuk judgment and to highlight the consequences of not doing so.

The circumstances of the Vnuk judgment are well known to motor insurers, as are the potentially wide ranging changes and consequences of implementing the judgment in the UK. In a nutshell, the judgment opens up the compulsory motor insurance requirement to insure the use of vehicles wherever they are used if the use is consistent with their normal function. In parallel, implementation would be likely to involve bringing the definition of 'vehicle' in the RTA in line with the much wider definition in the Directive, which is: “any motor vehicle intended for travel on land and propelled by mechanical power, but not running on rails, and any trailer, whether or not coupled”.

Last chance

REFIT is now the best and perhaps the last chance to amend the Directive to mitigate the more unwelcome effects of Vnuk. Prior to the Brexit referendum the UK Government had lobbied for the Directive to be amended to mitigate some of the effects of the Vnuk judgment. With a UK Commissioner leading the part of the Commission responsible for motor insurance the UK’s concerns were certainly being listened to. Inevitably, the Brexit vote changed that: Lord Hill resigned and without many other Member States raising serious concerns about the Vnuk judgment the impetus for an amendment slipped away. The opportunity to amend the Directive in light of the Vnuk judgment now rests with the wider REFIT process. It is probably the last chance to achieve this.

Is Brexit the answer?

Some may feel that Vnuk is not a problem for the UK because we are leaving the EU. That may indeed be the case, especially if the final negotiated deal with the EU does not involve being bound by EU law or the European Court of Justice. However, there are no certainties that the final deal will look like that. Also, before leaving the EU it is likely that some sort of transitional arrangement will be agreed. The EU is open to this, but expect it to be an off-the-shelf arrangement, rather than the bespoke transitional deal the Government wants. If the EU aims prevail, that could be EEA membership, which could leave the UK bound by EU law for 2-3 years after the Article 50 negotiation period ends in March 2019. In which case, arguably, that could mean the Government has to implement Vnuk.

The Vnuk aspect of the response to the EU’s consultation is therefore very important, especially to make a strong case that the judgment does not make the law simpler or less burdensome, financially or otherwise. MIB is working with the industry through various trade bodies and with the Government to make sure that our response is both convincing and consistent.  

Conclusion

The REFIT process presents challenges and opportunities for sure. We need to do our best to try and convince the Commission to mitigate some of the consequences, costs and burdens created by Vnuk. We are working on our response at the moment and will share that as soon as possible with industry bodies.

Above all we want the Commission to understand the wide ranging impacts for the UK.  We will be setting out our fears that introducing what would be, at least in part, an unenforceable regime would risk undoing so much of the good work that has been done over the last decade to reduce the problem of uninsured driving on UK roads. Add to that a whole host of other problems including the creation of opportunities for fraudsters, as well as the imposing of additional financial burdens on the motoring public, and it makes sense to take the opportunity to attempt to avoid the chaos that would ensue.  

It is really important for insurers to also respond individually and we would be only too pleased to help members compile their own responses.  If you would like some assistance on this issue, please contact: Nick Robbins, Head of Market and Public Affairs, MIB. Email: nrobbins@mib.org.uk