The increase in terrorist activity - and the change in terrorists' focus and style of attack - has seen a rise in using vehicles as weapons. How has the motor insurance industry responded to the challenge of this changing landscape?
The terrorist attacks and disrupted plots of 2017 highlighted a major change in the terror threat to the UK, with a marked rise in the use of vehicles as a weapon (VAW).
VAW attacks in Europe and more recently in London show a disturbing trend for this low-tech, lone- agent attack misusing cars, vans and trucks with the aim of killing or injuring civilians; for the perpetrators, these types of attacks are easier to operate and spread fear among populations.
Security planning across the public and private sectors has had to adapt to address this new threat. So, too, has the motor insurance industry.
Victims of terrorism and other criminal acts normally receive compensation through the Criminal Injuries Compensation Scheme – a government scheme funded by the taxpayer.
But the question of liability for motor insurers is less straightforward. Where injuries arise from the use of a motor vehicle, then it is likely that the motor insurers concerned will have to deal with some of the claims.
The fact that exclusions in the policy may exist relating to deliberate acts or cover being restricted to prescribed uses of the vehicle will not affect their obligation to deal with the claims.
Insurers share costs
The motor insurance industry has been forced to confront difficult questions about financial – as well as moral – liability relating to the use of VAWs.
And in July this year, UK motor insurers voted to mutualise risks for terrorism claims, ultimately deciding that, in the event of an incident, UK insurers will share the costs, rather than leave a single company to cover them.
The decision follows a Motor Insurers’ Bureau (MIB) consultation that took place earlier this year. The MIB is the UK body that deals with the claims from victims involved in uninsured and hit and run accidents, and all motor insurers that write business in the UK are members of MIB.
From 1 January 2019, the MIB will be responsible for dealing with all third-party motor claims from victims involved in a terrorist event where a vehicle is used to kill or injure.
Steve Maddock, Chairman of MIB and Chief Operating Officer at Direct Line Group, says the move enables the bureau to act in the event of further atrocities.
“The motor insurance market has clearly signalled that it was right to consider if individual insurers or the market as a whole carry the risks associated with motor claims arising from terrorist attacks,” he says.
The bureau is now in the process of finalising its plans, including preparations to receive claims and the appointment of a reinsurance broker.
Paul Ryman-Tubb, Chief Technical Officer of MIB, says once plans are completed, the MIB will be communicating with insurers to convey the detail of its financial and operational preparation.
But, he adds, while the MIB is now committed to handling these types of claims, businesses should remember that their protection in this scenario will be no different and that their risk and exposure remains the same.
Risks and remedial action
The number of incidents of this type are thankfully low, though, when they do take place, their impact is understandably considerable.
John Hoey, Motor Broker at JLT Specialty, says that, as a result, reputational risk could be a problem if for some reason a business has failed to pick up on what might have seemed an obvious exposure.
Asked about the main risks facing companies operating their own fleets and the top tips for managing them, he says: “Terror groups will look for new ways to carry out attacks and as one target gets better at defence they will move to a softer one.
If a member of staff is known for sharing hate speech of any kind it is not going to be advisable to hand them the keys of a large commercial vehicle”.
In regards to vehicle hijack, if this becomes more frequent then it will be advisable for drivers to travel with the doors locked. If exposure increases, there is expert advice available depending upon the nature of the problem.”
The absence of successful terrorist attacks in the first half of 2018 does not mean an end to the threat. The risk landscape remains complex, with the UK threat level from international terrorism still set at severe.
Pool Re’s recent Terrorism Frequency Report shows that the security services have prevented at least one significant terrorist plot every month since March 2017, with the majority of those arrested appearing to be either extremists who have had their travel to Iraq and Syria frustrated, or individuals inspired by Islamist extremism to undertake mass murder, and that, in either case, their preferred target remains crowded places, where the use of VAW has been prevalent.
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For further information please contact John Hoey, Motor Broker on +44 (0)20 7558 3374.