Taking up the fight

The issue of uninsured drivers is one that affects the industry as a whole, with one in 20 people now driving uninsured in the UK. The Motor Insurance Database is viewed by both the industry and government as a potent weapon in the fight to rid the UK's roads of uninsured drivers. However, in the battle to achieve compliance, the changes required are having a profound effect on the way insurers and brokers do business.

From 20 January 2005, insurers have been required by law to provide full, accurate details of 95% of policyholders to the database within 14 days. The MID will allow the police to quickly check the insured status of a vehicle or its driver. Failure to meet the deadline can result in fines for insurers and clients if they withhold details. Although the legislation does not put any of the responsibility onto intermediaries, they still have a key role to play in ensuring that compliance is achieved. Without the full co-operation of intermediaries, insurers will not succeed in meeting their deadlines.

The use of electronic data interchange and electronic bordereau has made compliance with the database a far less stressful issue for the market; however, a clear division has appeared between compliance on electronic and manual business.

Manual business, including non-standard schemes and products, fleet and motor trade, continues to be constrained in the main by the more traditional processes. The mechanics do not exist to report data as quickly as the electronic route. In these instances, brokers need to take a more active role in obtaining and reporting the data to insurers in good time.

A step forward for the industry was the removal of the so-called 'days of grace' on the back of the renewal notice. Contrary to some people's perceptions, there has never been such a thing as a 'period of grace', but this did not stop it from being used as a loophole by uninsured drivers. However, one insurer took a lead in removing this cover and most other motor insurers have now followed suit. One other significant change that some insurers have made to their internal systems on renewals is to automatically lapse all policies after five days if confirmation to renew has not been received.

While the industry has come a long way, the question still being wrestled with is that of cancellation notification, an area in which the industry has not achieved compliance. Intermediaries must alter their practices if compliance is to be achieved. The ideal situation would be one where intermediaries are notifying the insurers on the day of cancellation so that the MID can be updated.

Despite these first steps, insurers have struggled to meet some of the compliance requirements, mainly because the demands of the MID came almost hand in hand with the new Financial Services Authority regulatory regime and insurers have been slow to educate intermediaries as to their role and key responsibilities in the MID process.

Some intermediary-only insurers have not only adapted many of their internal processes, but have spent much time educating and supporting their intermediaries to ensure the change is as simple as possible for them and their clients. This has paid dividends with the vast majority of these insurers' intermediary base now compliant. This success can also be attributed to system development; 90% of Highway's business is now transmitted electronically, with plans in place to increase this further.

An effective approach for insurers to non-compliant intermediaries is to work with them to find smart business solutions rather than threaten sanctions.

Although many insurers have yet to meet the current 14-day compliance target, there is optimism that the proposed seven-day target will be met, but it would be better if we all worked towards that target now before it becomes a legal requirement. Insurers and brokers certainly have risen to the challenge and adapted well during a time of much regulatory and compliance change. In the future, the industry needs to gear itself to the possibility that there will come a day when the requirement for MID updates will be in real-time.

It is still early days for the market and, as yet, figures as to how well the new MID is performing are yet to be seen. While the MID should assist in reducing the level of uninsured driving, the battle is far from over. There needs to be a general culture change - uninsured driving is not acceptable. Furthermore, there need to be greater deterrents and adequate punishment for the minority who seek to avoid obtaining insurance cover.

The Association of British Insurers' further measures include linking the MID with the Driver and Vehicle Licensing Agency database and with automatic number-plate recognition technology to allow the police to quickly identify those out on the road without insurance.

The MID is not the first and certainly will not be the last challenge for the industry, however, it is certainly a critical first step in winning the battle against uninsured drivers. There is still a long way to go but, with insurers and intermediaries prepared to rise to the challenge, this is a battle we can and will win together with the industry.

- David Murray, Deputy underwriting director

- Michael Lawrence, Distribution manager, Highway Insurance.