From 2008, brokers will be required to submit clients' motoring documents to the Motor Insurance Database within one week, down from the existing two weeks. While most welcome moves to combat uninsured drivers, some foresee complications in the commercial sector that may prevent the timeframe shifting up a gear. Ana Paula Nacif reports
The UK has one of the worst uninsured driving records in Western Europe, with an estimated one in twenty cars being uninsured. But in the past year alone, thanks to the Motor Insurance Database, the police managed to seize 60,000 uninsured vehicles and remove them from the roads.
Although the improvement is good news for the industry, a new requirement for brokers to submit clients' records to the database within seven days could put them under pressure. At the moment, they are allowed 14 days, but come 1 January 2008, they will have only one week to send the information through.
A panel of experts was asked to assess the impact this new requirement will have on the market at a recent roundtable event, held in conjunction with Kewill.
Despite the challenge, the industry is bullish about the results it has achieved so far. According to Ashton West, chief executive of the Motor Insurers' Bureau, the police are increasingly using the database, with website hits exceeding 30 million per year, equivalent to more than one per second.
According to Mr West, the UK is by no means the worst country in Europe when it comes to uninsured drivers, but it is lagging behind some of its neighbouring countries, which have managed to keep the level of uninsured drivers to a minimum.
"Anything less than 2% is seen as best practice," he explained. "Some countries have less than 1%, such as Germany, Sweden and other Scandinavian counties. The Netherlands has less than 2%."
Such success can be put down to many different factors, but Mr West explains there is a common element: all these countries have a record of insurance that they use to enforce the law.
"Having a database and enforcement from the record seems to be the only common feature among the most successful countries. We are not leading edge here, but as a country we picked up one of the best practices and now we are talking to other countries across Europe to exchange data across the database, so that we can deal with the problem of foreign uninsured drivers, which is a growing one," he added.
The target for the industry is to update the database within 14 days in 95% of the cases. "We are achieving 98% across the market and, if you look at seven days, we are already exceeding 94% and the requirement doesn't kick in until January," Mr West pointed out. "This is a huge success story."
Jack Brownhill, director of the Worldwide Motor Insurance Consultancy, added that, although there is a timescale, insurers and brokers are not relying on it. "We talk about 14 and seven days but that is just a compliance figure. Insurers and brokers do not sit there waiting for the seven or 14 days to come by; they do it as soon as they can."
However, the experts recognise that, despite the progress, it will not be all plain sailing. Issues for the industry include policy cancellations and MID2, which relates to commercial motor businesses, such as fleet and motor trade, where certificates are often issued on a blanket or unspecified vehicle basis.
One of the problems with cancellations is that a lot of business is written in instalments, so when the client defaults one payment, brokers and insurers allow a grace period before formally stopping the policy. This means during that grace period some drivers, who have not paid their premiums, still appear on the database as insured.
"We have an obligation to try and get the money again 10 days after the default payment," explained Alan Davies, insurer relations director at BDML Connect. "When we go to seven days it might be a problem, as we still have to give the client 10 days."
Mr Brownhill agreed that cancellation is a headache for the industry and that people could get away with being uninsured in the period between the payment default and the formal cancellation. Although Mr West believed that these are problems the industry will have to grapple with, he said it is important to keep an eye on the bigger picture.
"Failing to cancel a policy that should have been cancelled is a tiny part of the big issue," he commented. "We need to look at the database so the police can spot those who are not insured and, frankly, we are well on the way to doing that."
The problem with private vehicles may be a small part of the big issue, but the commercial side may prove to be a real challenge for the industry. "The area we have problems with is the MID2 area - such as motor trade, fleet and taxis - where intermediary systems have never been prevalent," admitted Mr Brownhill. "There is a of lot manual activity and the market has got some way to go before bringing those kicking and screaming into the modern age."
Mr West agreed, adding that whereas compliance will most certainly be achieved in the personal lines side, the same cannot be said for commercial vehicles. As this area has proven to be "extremely problematic". "We are trying to get insurers to recognise that this is for their customers' benefit," he explained. "For those insurers that are not where they should be, we have regulation and self-regulation."
"However," he continued, "if you want the policyholder's behaviour to change, you need to create pressure and get fleet and commercial organisations to recognise that if they are not in the database their business is at risk."
Currently, most consumers are not aware of their obligations under the law and there was a general consensus that this is paramount if the system is to run smoothly, especially on the commercial side.
The database's main objective is to improve the record of uninsured driving in the UK and the insurance industry is at pains to make sure those who are paying are not adversely affected. "One reason the MIB was set up was to be the single point of contact, so that the police can delve deeper if there is any discrepancy," explained Mr Brownhill.
Running the risk
"Businesses do not recognise the risks they are running," Mr West emphasised. "What will happen is that we will have more and more companies having their vehicles seized by the police, when they are perfectly insured but not on the database. This will help to get the message across that it is not about having the vehicle insured, they need to make sure it is on the database."
Graeme Trudgill, manager of technical services at the British Insurance Brokers' Association, agreed: "With fleet motors, things are different. Brokers tell their clients, but you can only lead the horse to water. At the moment, clients don't worry about putting a new vehicle on to the database. There is a big change in what the client has to do and their attitude towards it."
Malcolm Etchells, business development analyst at Groupama, emphasised that, for brokers, customer service and not compliance should be at the heart of the issue.
"We are talking about customer service in two ways. One is that the whole purpose of the MID is to reduce uninsured driving. If we do that, we provide service to our customers by reducing premiums across the board," he explained. "Second, from a basic customer service point of view, every day our customers are not in the MID, when they are legitimately insured, there is in danger they will be pulled over by the police and have their vehicles seized; that is how we should be looking at this."
Brokers have a role to play in educating their clients about their new responsibility. Experts agree that those whose practices are not up to scratch could risk losing some of their business. Mr Trudgill claimed this could be an opportunity for brokers to prove their added-value service and even pinch business from the competition, including large firms.
"The broker has to agree at inception who is responsible for updating the MID," he explained. "Some brokers take it on themselves to update the database on behalf of the client and charge a fee for it, which is perfectly justified. Other brokers don't want the responsibility. So the client can choose: do I want a broker that is going to support me? Also, big brokers do not want to do it and that is where smaller brokers can come in and take business from them."
It is not only brokers and other stakeholders in the insurance industry that have a role to play, Mr Trudgill called for the government to be more proactive in raising awareness now - not only about uninsured driving, but also about the MIB.
And the government is expected to launch an advertising campaign next year to raise awareness around the issue. "In a year or so, there will be an insurance enforcement agency set up by the government, which will be sending out penalty notices and fines to all uninsured drivers," Mr Trudgill explained. Although he added that the government should not wait as long to launch a public campaign to tackle the problem.
Raising awareness, along with enforcement measures, may well help policyholders to focus their minds, but the industry has admitted it has difficulties in prosecuting those who do not conform. "Theoretically, there is a legal obligation on the policyholder to supply the data and failure to do that would result in prosecution," explained Mr West. "However, we have not achieved that largely due to the difficulties in getting the Crown Prosecution Service to bring those prosecutions through."
He added that the main issue is to change people's mindsets, which he believed would happen when they saw themselves inconvenienced, having their business affected and their vehicles seized by the police. "People have always believed all that is needed is insurance - firms don't understand. The message we need to get across is to change this understanding."
Regardless of how long it takes for the general public to understand and act upon the changes, Mr Etchell believes that, if the current requirement gets any tighter, the industry may have problems coping. "The broker sends the data to the insurer, the insurer sends it to the MID," he says. "It may take four days, if you do it on Friday you have the weekend, and if you do it on Christmas Eve you have no chance."
However, seven days is not the end of the line, according to Mr Brown. "It can't be and the industry needs to accept that. There is pressure all the time to push those numbers back even further and we need to start to think about it now."
Mr West agreed saying that it is "inevitable" that the government, at some point, will do that. He explained: "We need to look into it and build the business case around that. This is not about uninsured driving; it is about transforming the process and looking at the benefits and costs implied. We need to embrace it now and look at how this model can help the business. We need to do that sooner rather than later."
He added that the industry could get more out of the database and use it as a business tool. "We need to understand how we can extract more value from it. For example, people involved in an accident could send a text message to find out who the insurer is and the insurer could be notified immediately: there are all sorts of opportunities."
Some also believed that there are insurers and brokers using the lack of sanctions and long delivery times to "not play the game as well as they should", as Mr Brownhill put it. He also emphasised that people will not be able to hide behind this excuse for long, as pressure from consumers to expose those who are not up to scratch increases.
A big effort has been made by the whole industry, helped along by the Financial Services Authority regulations and it also seems that many insurers are moving from traditional manual systems to electronic ones. However, some parts of the industry are slower than others and it was suggested that different timescales could be introduced to help this - in renewals and new business, for example.
"There is an opportunity for us to look at differential targets between new business, and adjustments and cancellations," explained Mr Etchells.
But if the industry is to push forward with current as well as perhaps future more demanding requirements, some argue that technology also needs to improve. Mr Davies said that electronic systems are still failing, leaving insurers and brokers in the dark about the exact situation of their clients.
"We have found that errors do occur and sometimes the information gets lost in the system," he explains. "We send it, so we think it is all done. Insurers haven't got it but don't know we have sent it. And all of a sudden you can have policyholders being stopped by the police to be told they are uninsured."
With massive amounts of data being moved around every day, experts argue that it is almost impossible to have a trouble-free system. "In any system that moves data around," said Mr Brownhill, "inevitably there will be some failure. You have to remember that every day we send lots of messages around in this business. However, we need to make sure we have everything in the right place and checks along the line."
Debbie Baker, business unit director at Kewill, believed that the brokers could do with a repository system that could be used by brokers and insurers to make sure information is delivered to all parties. "This is something that happens frequently in other markets," she explains. "It is like a hub solution. The information is submitted into one place and then transformed into the format other parties can use. It is like an electronic air traffic control system."
The problem of uninsured drivers will not go away overnight and it seems that both the insurance industry and the government still have some groundwork to do. "People should get their house in order," warned Mr Trudgill. "And they need to do it now."
As for the government, he concludes: "We see publicity campaigns about tax discs and registering your vehicle. I have never seen anything like that about uninsured driving. I know it has the intentions to do it in due course but I see no reason why nothing has been done until now. Everyone knows it is a problem."
- Debbie Baker, business unit director - Insurance, Kewill
- Jack Brownhill, director of World Motor Insurance Consultancy
- Alan Davies, insurer relations director, BDML Connect
- Stephanie Denton, supplements editor, Post (chair)
- Malcolm Etchells, business development Analyst at Groupama
- Graeme Trudgill, manager of technical services, British Insurance Brokers' Association
- Ashton West, chief executive, Motor Insurers' Bureau.
- Analysis: The mystery of the missing Insurance Fraud Taskforce report
- Green light for UK-US insurance trade deal
- Roundtable: Is a single customer view taking off in insurance?
- Travel insurtech Pluto begins beta test
- O’Connor replaces Fairchild at the helm of Broker Network
- Majority of customers support a ban on dual pricing
- Blog: What workplace inequality means for insurers