The history and future of vehicle insurance

Car insurance became compulsory in the UK close to a century ago, but it’s undergone many changes since then. New laws have been introduced, old ones have been altered, and the way uninsured vehicles are found has changed. In the near future, we’re likely to see even more changes as autonomous vehicles take to our roads.

In this article, we’re taking a quick look at some of the ways vehicle insurance has changed over the years, and at how it’s changing today.

Why is vehicle insurance important?

Cars are an extremely useful tool, but they can also be dangerous. If a car causes harm to a person or damage to property, there are costs involved, and they can be more than the driver is able to pay. In that case, both the driver and anyone else affected by the accident will be left in a difficult situation.

By requiring all vehicle owners to take out insurance, the law aims to ensure that, if there’s an accident, an insurance company will be able to step in and pay the necessary costs. Those affected by the accident can be compensated without bankrupting the driver.

The origins and present of compulsory vehicle insurance

Car insurance first became compulsory in the UK with the Road Traffic Act 1930. There are aspects of the act that didn’t last for long – for example, it abolished speed limits, which would return five years later – but compulsory vehicle insurance is still around, although it’s changed over time.

The Road Traffic Act 1930 required drivers to be insured against physical harm caused to any person by the use of a vehicle. Present-day law, set out by the Road Traffic Act 1988, has added a requirement for insurance against property damage.

For a while, it was possible to make a deposit of £500,000 with the Accountant General of the Senior Courts instead of taking out vehicle insurance. Few drivers could afford this alternative, of course, and it was taken up only by a small number of companies. The option was removed in 2019, in part because the £500,000 deposit might not be enough to cover a claim.

Although you’re only required to insure against harm your vehicle might cause to third parties, you might also choose to insure your vehicle against any damage that might befall it: theft, vandalism or destruction by fire, for example.

Before cameras on phones became widespread, claimants would often need to draw a picture of the incident that led to the claim. If you’d like to see some of the resulting works of art, take a look at Aviva’s excellent ‘Claims, blames and automobiles’, which also touches on some aspects of motor insurance history that aren’t covered here.

Continuous insurance enforcement

In the current version of the Road Traffic Act 1988, section 144A(1) dictates that vehicles must be insured at all times:

If a motor vehicle registered under the Vehicle Excise and Registration Act 1994 does not meet the insurance requirements, the person in whose name the vehicle is registered is guilty of an offence.

In other words, even if a car isn’t driven for a few months, it’s illegal to let the insurance lapse during that time. This rule is called continuous insurance enforcement, and it came into effect in 2011.

It’s possible to declare a vehicle ‘off the road’, in which case it doesn’t need to be taxed or insured. This involves making a Statutory Off Road Notification (SORN) to the DVLA, after which the vehicle can no longer be driven or parked on public roads.

How uninsured vehicles are found

Until 2014, car owners in the UK were required to display a valid tax disc on their car. This was a receipt for payment of vehicle tax, but it also helped to show that the vehicle had been insured, as it isn’t possible to tax a vehicle without insurance. Tax discs were abolished on 1 October 2014, as electronic systems meant it was no longer necessary to issue physical discs.

Nowadays, the Motor Insurance Database (MID) is used to keep track of the insurance status of vehicles in the UK. UK insurers are legally required to provide information about the vehicles they insure to the database, meaning that, in theory, the MID has a record of all the insured vehicles in the country. The police have access to this database and can use it to check whether a vehicle has a valid insurance policy.

Cameras with automatic number plate recognition (ANPR) technology, such as speed cameras, can recognise the number plates of passing vehicles. These number plates are checked automatically against the MID to ensure that the vehicles are insured.

Insuring autonomous vehicles

UK legislation specifies that a person must not use a vehicle without insurance. Section 143(1a) of the Road Traffic Act 1988 reads:

a person must not use a motor vehicle on a road or other public place unless there is in force in relation to the use of the vehicle by that person such a policy of insurance as complies with the requirements of this Part of this Act

Perhaps unsurprisingly, the Road Traffic Act 1988 doesn’t consider the possibility of autonomous vehicles.

There are different levels of vehicle autonomy, and at the moment the law only allows for vehicles up to level 2 on UK roads. A level 2 vehicle can assist the driver with steering, acceleration and braking under certain conditions, but it’s still being operated by a human at all times.

At higher levels of autonomy, the human in the car is no longer considered the driver. Before these vehicles can be allowed on our roads, we need to be able to insure them. This means that insurance companies will need to tackle a brand new question: how do you insure a vehicle when it’s not driven by a person?

The cost of vehicle insurance is calculated based on the driver’s estimated risk of needing to make a claim. Insuring an autonomous vehicle will require an entirely new set of calculations. For example, the age of a self-driving car doesn’t affect driving risk in the same way as the age of a human driver.

How should autonomous vehicles be insured? At Darwin, we’ve partnered with Aviva to help answer this question. Using the information we gather through autonomous vehicle trials, Aviva aims to offer comprehensive insurance for autonomous vehicles.

Insurance is compulsory for all vehicles on the road, which means we won’t see self-driving cars in wide use until they can be insured. Alongside Aviva, we’re working to bring that day closer.

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