Statutory Insurances – Are You Actually Exempt?
In line with Legislation, all public bodies are exempt from motor and EL insurance. This also applies their leased vehicles and also to some charities, which can be funded or controlled by eg DCMS to carry out a social purpose.
However, this is only one part of the story and the current political situation may lead to amendments to the exemptions. Therefore, it pays to take a closer look at EL and motor requirements to understand how insurance deposits work.
Quick Overview of EL and Motor Exemptions
EL (Employers’ Liability) Insurance
The insurance for public bodies and insurance for local authorities is exempt from covering EL. Furthermore, this applies to any corporate body that’s under national control or ownership. Here’s a list of the exempt bodies.
- Central government
- Harbour authorities
- Non-department public bodies
In addition, the exception applies to all other private entities that carry out a statutory function – companies that are, at least, partially controlled by the government.
EL Case Study – The NHS
As of mid-1999, the Risk Pooling Schemes for Trusts have been adopted. They include the Property Expenses Scheme (PES) and Liabilities to Third Parties Scheme (LTPS).
The NHS organisations may use one or the other scheme, or both. It’s worth noting that the schemes are designed to cover excess claims. Consequently, the organisations are required to cover all the expenses below the excesses.
However, many experts indicate that these are actually quasi-insurance contributory schemes, not actual insurance. And they seem like a good way of avoiding/minimising IPT (insurance premium tax) – legally!
Motor Legislative Changes
The S144 exemption was removed from August 2019; this permitted vehicle owners who kept a deposit of £500,000 (per owner, not per vehicle) with the Accountant General to obtain an exemption certificate from Motor Third Party cover. These exemptions were used by some coach and taxi fleets.
How Did Motor Deposits Work?
If a company placed a £500,000 deposit, all of its’ owned vehicles would be exempt from compulsory insurance (for business use). Companies were not required to renew the deposit, even if the depositor’s financial position changes from the moment the required sum was deposited.
On the other hand, the deposited sum might not cover all third-party liabilities caused by the vehicles that are part of the deposit. In some cases, personal injury claims may exceed £1m, leaving victims without full compensation.
If the depositor failed to meet claims, the MIB doesn’t compensate the victim. In this case, the Part VI Road Traffic Act (RTA) isn’t being enforced and the vehicles and victims remain outside the Uninsured Drivers Agreement.
Again, this was a good way of avoiding/minimising IPT (insurance premium tax) – legally!
The S144 exemption was removed in August 2019, to stay consistent with the EU laws, but with Brexit agreed and terms now being negotiated, these changes may no longer be relevant and/or reversed.