New Car Insurance Laws Explained

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The laws governing car insurance in the UK have changed quite dramatically over recent years. First, drivers had to get used to the Continuous Insurance Enforcement (CIE) regulations that came in during the summer of 2011. As the name suggests, these require all car owners to insure their vehicle or vehicles at all times – whether or not they are being taken on the roads. Then, on December 21, 2012, a European Court of Justice ruling preventing insurers from using gender to help calculate their car insurance quotes came into force. Many drivers – particularly female motorists who benefited from lower premiums in the past – are likely to pay more for their car insurance as a result. Here, we look at why these changes were introduced and their impact on you as a motorist.

Continuous Insurance Enforcement (CIE) regulations

As of June 2011, all vehicles registered in the UK must now be continuously insured. The only exception to this rule is when the owner has guaranteed that the vehicle never goes on the road by sending a completed Statutory Off Road Notification (SORN) to the Driver and Vehicle Licensing Association (DVLA). Basically, if you are not using your vehicle, and you can keep it off the public highway, you should fill in a SORN. And if you are using it, it must be insured at all times. Failure to abide by CIE could result in a court prosecution and a penalty of between £100 and £1,000, while your vehicle could also be wheel-clamped, impounded, or even destroyed.

These measures are in addition to the powers the police already have to seize an uninsured vehicle and fine its driver. And with the DVLA and the Motor Insurance Database (MID) working together to pinpoint drivers who have not insured their vehicles, the chances of flouting the rules successfully are slim. The good news, however, is that cracking down on uninsured drivers in this way should reduce the cost of the accidents caused by these motorists. As these costs are covered by the insurance industry, which adds about £30 a year on the average policy to cover them, this should then translate into cheaper premiums for us all.

The European Court of Justice (ECJ) Gender Directive

In 2011, the European Court of Justice ruled that, from December 21, 2012, insurers could no longer use gender when setting premiums. The ruling came about after the Belgian consumer group Test-Achats called for new regulations outlawing “discriminatory” pricing by gender. Unfortunately for safety-conscious female drivers, however, the main impact of the Gender Directive on their lives is that they are likely to have to pay more for their car insurance. Male motorists, on the other hand, are unlikely to have noticed much of a reduction in the cost of their cover.

Other financial services affected by the Gender Directive include life insurance and the cost of using your pension to buy an annuity (or annual retirement income for life). Life insurance premiums were formerly lower for women due to figures showing that women live longer (and thus are less likely to make a claim during a given term). With annuities, however, women paid more on the basis that they would receive their annuity payment for longer). Now, however, life insurers and annuity providers must treat male and female customers the same, increasing life insurance premiums for women and reducing annuity rates for men.

Consumer Insurance (Disclosure and Representations) Act

The Consumer Insurance (Disclosure and Representations) Act received Royal Assent in March 2012 and is expected to come into force in March 2013. Its aim is to make it more difficult for insurers to refuse to pay out on claims due to the policyholder failing to volunteer material facts. Instead, customers must take reasonable care to answer their insurer's questions fully and accurately in order to qualify for a payout. This should make it simpler for consumers to understand their obligations. However, there are concerns that the Act will push up insurance costs across the board due to the increased number of claims that will have to be accepted and paid.        

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