WRITTEN QUESTION E-1383/97 by Mark Watts (PSE) to the Commission (22 April 1997)

Subject: Motor insurance in Britain for non-British nationals

Is the Commission aware of cases of non-British nationals living in Britain where motor insurance is difficult to obtain because the driver owns a foreign-registered vehicle and a driving licence obtained in another EU country?

What action is the Commission taking to ensure that such discrimination does not take place?

Answer given by Mr Monti on behalf of the Commission (24 June 1997)

Under Community law on motor insurance, the place in which a vehicle is registered is the determining factor for deciding in which Member State the risk is located. The location of risk on the basis of place of registration is a feature of the 'green card' system ((Established by Recommendation No 5 of 25 January 1949 of the Road Transport Subcommittee of the Inland Transport Committee, United Nations Economic Commission for Europe. )) which forms the basis of the system of compulsory third-party liability insurance for motor vehicles in the Community and enforcement of the obligation to hold such insurance. Council Directive 72/166/EEC ((OJ L 103, 2.5.1972. )) stipulates that the Member State where the vehicle is registered must ensure that it is covered by a compulsory insurance policy against civil liability arising out of its use. This compulsory insurance, on the basis of a single premium, covers damage caused by the vehicle in the territory of other Member States, in accordance with the laws in force in those Member States, or provides the cover required by the law of the Member State of registration when that cover is higher ((Directive 90/232/EEC, OJ L 129, 19.5.1990. )).

Community law also stipulates that an insurer from a Member State wishing to provide compulsory civil liability insurance for motor vehicles must be in possession of an authorization issued by his Member States of origin and must also be a member of the motor insurers' bureau and the road accident victims compensation fund (guarantee fund) in the Member State in which he wishes to do business. Membership of these two bodies is necessary to ensure the smooth running of the 'green card' system and the system of compulsory motor vehicle civil liability insurance established by Council Directives 72/166/EEC, 84/5/EEC ((OJ L 8, 11.1.1984. )) and 90/232/EEC. The insurers' bureau handles the administration and compensation in respect of road accidents caused by a vehicle from one Member State in another Member State, while the guarantee fund compensates damage caused by uninsured or unidentified vehicles.

Community law allows any insurer from one Member State to do business in the field of compulsory motor civil liability insurance in any other Member State, either through a company branch or under freedom to provide services. Where an insurer from one Member State wishes to provide compulsory motor civil liability insurance in another Member State for vehicles registered in that Member State, he must be a member and contribute to the financing of the national motor insurers' bureau and national guarantee fund. Furthermore, if he wishes to carry on business by way of freedom to provide services, he must appoint a representative resident or established in the Member State concerned to process claims under the policies secured there ((Directive 90/618/EEC (OJ L 330, 29.11.1990), amended by Directive 92/49/EEC (OJ L 228, 11.8.1992). )).

In the case raised by the Honourable Member, since the vehicle in question is still registered in a Member State other than the United Kingdom, it is, for the purposes of determining the location of risk, considered a non-British risk. Consequently, the compulsory civil liability insurance should be covered by a policy taken out with an insurance undertaking authorized to carry on business in the Member State in which the vehicle is registered, operating either by way of establishment in that Member State or under freedom to provide services from the United Kingdom.

If the British insurer is not authorized to carry on insurance business in the Member State where the vehicle is registered, in accordance with the conditions described above, he cannot legitimately provide insurance cover for a risk located in that Member State. Once the vehicle has been registered in the United Kingdom, it is up to the British authorities to ensure that it is has compulsory civil liability insurance in accordance with the requirements for cover laid down by British law.

With regard to the fact that non-British nationals with foreign-registered cars may enjoy less favourable terms than British nationals, it should be pointed out that the rules prohibiting discrimination on grounds of nationality and the rules on freedom of movement under the EC Treaty are in principle applicable to state measures and not private measures. The Court of Justice has allowed exceptions to this rule only in the case of privately-introduced restrictions arising from privately-introduced measures with a view to organizing on a collective basis the conditions for exercising professional activity ((Judgment in Case C-55/94 Gebhard [1995] ECR I-4165; judgment in Case C-415/93 Bosman [1995] ECRI-4921. )). However, the individual behaviour of insurance undertakings in dealings with their clients cannot be covered by this exception. The contract between insurer and insured creates links under private law, which, in principle, are governed by national law and must be referred to the national courts.

In any event, if British insurance companies treat cars registered in other Member States differently from UK-registered cars, this should not be called discrimination. Where risks are located in different Member States, the insurance company has the right to consider that the risk to be insured is greater or lesser in one Member State than in another. Similarly, the cost of contributing to the guarantee fund may vary from one Member State to another. The rule against discrimination does not apply where situations are different.