Motor insurance market, regulation and compulsory requirements
What the exam tests
The market, distribution and compulsory third-party law. You need to know who regulates motor insurance and what cover the law requires before a vehicle can be used on a road or other public place.
Core rules
- Road Traffic Act 1988 s143 makes it an offence to use a motor vehicle on a road or public place without at least third-party insurance.
- s145 sets the minimum policy cover: liability for death or bodily injury to third parties, and property damage, subject to the statutory property damage limit.
- s151 requires insurers to satisfy certain third-party judgments even where the policy is avoided or the driver is not covered, with rights of recovery. s148 restricts policy terms that purport to restrict compulsory cover.
- The Motor Insurers' Bureau handles claims involving untraced and uninsured drivers under its agreements; it is not the insurer of last resort for every loss.
- The FCA regulates conduct and prudential standards (with the PRA for larger firms); ICOBS and the Consumer Duty apply. The MID records policy details, but it is not a live confirmation of cover.
Worked example
A driver with a comprehensive policy lets an uninsured friend drive and the friend injures a pedestrian. The insurer may decline the friend's own damage claim, but under s151 it may have to satisfy the pedestrian's judgment. It can then seek recovery from the friend. If the driver had no policy at all, the pedestrian may claim from the MIB under the Uninsured Drivers Agreement.
Traps
Compulsory cover is third party only: it does not repair the insured's car. A certificate is evidence of cover, not the whole contract. Do not assume the MID proves cover at the moment of an accident. Policy avoidance does not always defeat a third-party claim.