Motor insurance

Motor vehicle insurance, also called automotive insurance, a contract by which the insurer assumes the risk of any loss the owner or operator of a car may incur through damage to property or persons as the result of an accident. There are many specific forms of motor vehicle insurance, varying not only in the kinds of risk that they cover but also in the legal principles underlying them.


Flooding of a residential neighbourhood in New Orleans caused by Hurricane Katrina, August 2005.

insurance: Automobile insurance

Nearly half of all property-liability insurance written in the United States is in the area of automobile insurance. Set up as a comprehensive contract in most parts of the world, automobile insurance covers liability, collision loss of the vehicle, all other types of…

Liability insurance pays for damage to someone else’s property or for injury to other persons resulting from an accident for which the insured is judged legally liable; collision insurance pays for damage to the insured car if it collides with another vehicle or object; comprehensive insurance pays for damage to the insured car resulting from fire or theft or many other causes; medical-payment insurance covers medical treatment for the policyholder and his passengers.

According to the Insurance Information Institute, in the United States in the early 21st century, about two-thirds of the money spent on premiums for private passenger auto insurance went to claims. More than half of this amount covered car damage. The rest covered personal injuries. The remaining third of the money spent on premiums covered insurance companies’ expenses—such as commissions, dividends to policyholders, and company operations—and contributed to their profits.

In many countries, other approaches to automobile accident insurance have been tried. These include compulsory liability insurance on a no-fault basis and loss insurance (accident and property insurance) carried by the driver or owner on behalf of any potential victim, who would recover without regard to fault.

Most existing no-fault plans are limited in the sense that they usually permit the insured party to sue the party at fault for damages in excess of those covered by the plan and permit insuring companies to recover costs from each other according to decisions on liability. Total no-fault insurance, on the other hand, would not permit the insured to enter tort liability actions or the insurer to recover costs from another insurer.

If you know anything about insurance policies, you know that nothing in that cover comes without an asterisk mark. While what is covered is written in big and bold, the exclusions, terms and conditions are often in fine print and also loaded with jargon. Your car insurance policy isn’t any different. If the cover is a comprehensive or bundled plan i.e. it comprises third-party motor insurance as well as own-damages cover, understanding the conditions attached is even more complicated. Let us loo ..

Under the 2009 motor insurance directive, anyone who holds a compulsory motor insurance policy in an EU country is covered to drive throughout the entire EU.

This directive

obliges all motor vehicles in the EU to be covered by compulsory third party insurance

abolishes border checks on insurance, so that vehicles can be driven as easily between EU countries as within one country

specifies minimum third-party liability insurance cover in EU countries

specifies exempt persons and authorities responsible for compensation (pdf 129kb)

introduces a mechanism to compensate local victims of accidents caused by vehicles from another EU country

requires claims about accidents in an EU country other than the victim’s country of residence to be settled quickly (so-called visiting victims)

entitles policy holders to request a statement of any claims involving their vehicle, which were covered by their insurance contract, over the last 5 years

The directive does not regulate

issues of civil liability and the calculation of compensation awards – these are decided by individual EU countries

optional or so-called comprehensive cover (for physical injury of the driver, material damage to vehicles, vehicle theft, etc)

Review of the motor insurance directive

In May 2018 the European Commission presented a proposal to amend the motor insurance directive. Under the revamped rules, once adopted by the European Parliament and the Council,

victims of motor vehicle accidents will receive the full compensation they are due, even when the insurer is insolvent

drivers who have a previous claims history in another EU country will be treated equally to domestic policyholders, and will potentially benefit from better insurance conditions

The proposed amendment also makes it easier for authorities to combat uninsured driving, aligns the minimum levels of cover by motor insurance across the EU, and incorporates case law of the EU Court of Justice on the scope of the directive.