23 November 2015

What does a hoverboard have in common with a car?


David Spencer, partner at insurance and risk law specialist BLM reports on the changing face of motor insurance in the UK.

We have all seen headlines dominated by celebrities riding “hoverboards” and Segways around the streets and these alternative modes of transport are readily available and becoming more fashionable for use on busy streets and in some cases as a means of transport to get around cities to see the sites.  Yet most people appear to be unaware of the risk if injury should occur. Recently, we were witness to an incident involving Usain Bolt at the World Athletics Championships when he was knocked over by a cameraman on his Segway with, thankfully, no lasting harm to either. 

Vnuk case

The Government will very soon have to change the law on motor insurance law and the insurance position for such vehicles will also change. Any motor vehicle – not just registered for road use – functioning normally and used anywhere on land may soon require compulsory insurance. Following the European Court of Justice ruling in Vnuk, the Government will shortly issue a consultation paper. That consultation will need to consider what vehicles will fall outside the requirement for compulsory insurance.

This imminent change will affect policyholders’ insurance arrangements, because some of the incidents currently covered under their employers’ liability (EL) and public liability (PL) insurance policies will have to switch over and be picked up by a motor policy. The current Road Traffic Act will have to be amended by Parliament.

Incidents and vehicles caught

The law change is very likely to bring into scope a range of off-road vehicles and situations that would not previously have been included in motor policies, unless the Government makes a special exemption for specific types of vehicle when it consults about the changes. We expect that to take place in early 2016.

Companies in a vast array of sectors will need to take note of this important development, as any vehicles they use in off-road settings will now require insurance cover that complies with the Road Traffic Act (RTA). This would include vehicles such as tractors, quad bikes, sit-on cleaning equipment, cherry pickers and forklift trucks could now be caught under the umbrella of a motor (fleet) policy.

Underwriters will need to be aware of the implications and extent of change. Policyholders who may not have needed RTA cover for non-road motor incidents (because their non-road vehicles were never used on the road) will now consider purchasing cover and will be looking for price competitive solutions – and for cover that is appropriate to their perception of risk for their sector. Underwriters will need to consider the issues that arise from writing RTA-compliant cover for risks that were previously allocated to casualty classes of insurance business. Regulatory issues, underwriters’ business models, wordings, excesses and limits of indemnity will all need to be carefully reviewed.

Impact and timing

Although there is no change in underlying claims risk, the insurance differences are important. Unlike EL and PL policies, motor policies must provide unlimited cover for personal injury claims. And any insurer offering a policy for Road Traffic Act risks must be authorised to write that risk, and also be a member of the Motor Insurers’ Bureau (MIB).

The changes outlined here will not take effect until the Road Traffic Act is amended by Parliament and will apply only for claims occurring after that change. But we expect the process to move quickly and for the Government to start consulting about how to make the changes very soon. 

Following that, it is entirely possible that the Act could be altered in early 2016.

David Spencer, partner at insurance and risk law specialist, BLM