Update: The impact of terrorism on the motor insurance industry

In our June special edition of Insight, we explained why UK motor insurers are dealing with claims arising from terrorist attacks involving the use of a motor vehicle.  This followed the tragic events on Westminster Bridge, London Bridge and Finsbury Park.

As all of these incidents involved injuries arising from the use of a motor vehicle, then it is likely that the motor insurers concerned will have to deal with some of the claims. The fact that exclusions in the policy may exist relating to deliberate acts, or cover being restricted to prescribed uses of the vehicle, will not affect their obligation to deal with the claims under the rules set out in MIB’s Articles of Association, particularly, Article 75.

We said at the end of our June edition that we would be discussing this complex issue with members and other stakeholders in an effort to see that the implications are understood and ultimate solutions are acceptable for all parties.  This work continues, and some clear questions and challenges are emerging.

There will rightly be an expectation of support and compensation for the victims and the role of the insurance industry following any disaster, or in times of distress, is crucial in this context. However, where the ultimate financial cost actually falls may not always be clear from the outset and gives rise to some difficult questions.

Not everyone injured or killed in these dreadful attacks, suffered injury directly from the use of a motor vehicle. Some received wounds from stabbing or other causes. 

Victims of terrorism and other criminal acts normally receive compensation through the Criminal Injuries Compensation Scheme, which is a Government scheme paid for ultimately by the taxpayer. However, compensation from motor insurers, or the MIB (in a case of an uninsured vehicle) ultimately comes from premium paying motorists. 

We also mentioned in the special edition that the Criminal Injuries Compensation Scheme does not pay an equivalent level of damages to an insurer.  This and the point made above about the ultimate payer, give rise to the following questions:

• Is it justified that, in relation to personal injury, the costs arising from acts of terrorism involving the use of a motor vehicle fall on drivers through motor insurance premiums whilst the costs of other forms of terrorism fall on the State and therefore ultimately general taxation?

• Will people injured in the same terrorist attack receive differing levels of damages depending upon whether their injuries were caused by a vehicle or not?

We don’t know the answers to these questions at the moment but are working with other organisations and Government to understand the implications and help ensure there are long term acceptable solutions. In all of this we should not forget the tragic loss of life and life changing injuries that resulted from these terrible events.