Middlesea Insurance - no cover for drivers under 21

This was a topical issue this week. Basically, with regard to motor insurance, Middlesea decided not to insure drivers aged under 21. Here follow their comments:

We have taken corrective action through more selective underwriting. The company also feels that among a number of other factors, the lack of surveillance on our roads has led to an increased number of motor road accidents. One only needs to look at recent statistics drawn up by the authorities to confirm this.

Middlesea has always adopted a policy for its agents whereby such business is to be referred to Head Office. Middlesea's agents have been asked to strictly abide by this company policy. These measures are being taken to improve the quality of motor vehicle insurance business for the long-term benefit of its careful policyholders and its shareholders.

A large proportion of road injury cases involve inexperienced young drivers. Moreover, it is another known fact that injury victims are being granted considerably higher awards for injuries by the Maltese courts.

Indeed every endeavour is being made by the company not to penalise motor vehicle drivers who are responsible and careful on our roads.

Indeed this issue not only affects under "under-21" drivers, but all drivers. I accepted the validity of Middlesea's comments, but my bone of contention was the abrupt way it was being done.

Without necessarily looking at it from a legal point of view I dare say it was not fair to fix a date, at very short notice, by which drivers under 21 will no longer be insured.

On taking this decision I would expect an insurance company to honour existing policies and inform the respective under-21 drivers that they will not be able to renew their cover once their current policy expires.

I must stress however that this should only be allowed in a scenario wherein it is possible for the under-21 drivers concerned to find alternative cover.

We were facing the prospect of having a number of drivers who would not be covered by insurance. At this point Transport Minister Censu Galea stepped in and, as he did in previous situations covered in previous Customer Service Columns, he got directly involved. When I asked for his comments he told me: "While bearing in mind that we have around 7,000 new 'under-21' driving licence holders, I find it totally unacceptable to have a situation where such drivers are not insured, and, in view of this, I immediately contacted the Malta Financial Services Authority and asked them to deal with the matter".

Subsequently Middlesea made a commitment to contact its under-21 customers to ensure that they have obtained alternative cover. Moreover, where the under-21 drivers cannot obtain alternative cover, Middlesea will reinstate the cover until the policy expires.

In any case, statistics have shown that inexperienced drivers aged under 21 do constitute a higher risk while many mature, careful drivers constitute practically no risk, resulting in many claim-less years.

In view of this it would make sense for motor insurance companies to further increase the loadings applied to premiums as a result of claims when it is established that the relevant accident was a result of irresponsible driving.

Moreover, to drive the point home, on the other hand, they should give further (beyond 60 per cent) no claims bonuses to careful drivers who cost insurers absolutely nothing in claims. The contrast between a careful driver's premium and that of a reckless driver should be so sharp that all drivers will have no option but to drive with care.

I stress that a particular factor in such an exercise should be that in its implementation the relevant insurance companies income is not affected. Indeed the cost of such an exercise should be absorbed by reckless drivers irrespective of age.