Strictly there is no duty on an insurer to issue an invitation to renew the policy. As with other classes of insurance, however, it is normal for motor insurers to make a written offer of renewal. Most renewal notices are now computer produced and differ in style and information contained. In addition to the premium required to effect the renewal of the policy the notice will indicate, either in the form of a calculation or by separate statement, the policyholder’s no claim discount entitlement. Some notices go beyond this to indicate the registration number of the vehicle, give details of the cover that is provided under the policy, and note special aspects of the premium such as discounts allowed for a driving limitation or carrying an excess.
Unlike some other classes of insurance, however, there are no ‘days of grace’ under a motor policy within which the premium can be paid and full cover backdated to the renewal date. To ensure continuation of full cover the premium should be paid by the policyholder before the renewal date and the renewal receipt or acknowledgment, together with the certificate of insurance for the new insurance year, be issued to him. While there are no days of grace, motor renewal notices are unique in that they include a cover note providing fifteen days additional cover after the expiry of the contract. The cover provided is the minimum required by the Road Traffic Act 1972. The issue of the temporary cover note constitutes an offer of cover by the insurer, which the policyholder may accept either expressly or by implication. The payment of the premium during the period of extended cover is taken as an acceptance of the offer. If, however, the policyholder arranges cover elsewhere or indicates by a similar action that he does not intend to accept the offer, the cover under the cover note does not attach.
In Taylor v. Allon (1966) the protection provided by the temporary cover note was called into question. The defendant’s policy was due for renewal on 6th April and he effected a contract of the 16th of that month with another insurer. He used his vehicle on the 15th April, arising out of which he was prosecuted and convicted of driving uninsured despite efforts from the company issuing the temporary cover note that an RTA claim would have been met. The conviction was confirmed on appeal. Although much comment focused on offer and acceptance, the decisive elements were that the defendant did not intend to renew the contract nor was he relying upon the cover note at the time of the offence. Had there been such intention and reliance, it is doubtful that the prosecution would have succeeded.
If the policyholder does not receive the renewal notice or is unaware of the terms of the ‘Act’ cover, he cannot accept the offer, of which he is unaware. It is therefore of great importance that the insurer’s renewal notice including the ‘Act’ cover note is issued to the policyholder. To be valid, a certificate of insurance has to be delivered to the policyholder. Renewal certificates are prepared in advance and may require amendment due to changes advised when a renewal premium is paid. The provision of the cover note on the renewal notice protects the policyholder in the event of any delay caused by postage or other intervening factors.
If a premium is not paid within the validity of the cover note, an insurer will sometimes issue or provide for the broker a notice of reminder to be sent to the policyholder. When a premium is paid subsequent to the expiry of the fifteen days’ additional cover, special attention is required in respect of the certificate to be issued. It is an offence under the Road Traffic Act 1972 to backdate a certificate. Although contrary views have been expressed and there is an absence of case law on the subject it is accepted practice that if a renewal premium is paid during the period of the temporary cover note the renewal certificate can be issued as there has been no break in cover. If the premium is paid after expiry of the temporary cover note the renewal certificate will need to be re-issued from the date of payment of the premium although in practice a new 12 month policy may well be effected by the policyholder. The renewal notice will indicate, either in calculation or by separate statement, the amount of no claim discount allowed in the renewal premium as a reward for claims not having been made in the preceding or earlier years. Insurers are, however, normally willing to allow the discount from the first premium for a policy either when there has been a brief lapse in time since a previous policy was cancelled, or alternatively where the policyholder has transferred from another insurer. The discount will normally only be allowed on the production of adequate proof and the renewal notice constitutes the most readily available acceptable evidence.
Insurers take the opportunity of using the renewal notice as a medium for conveying information to the policyholder. This can be printed within the text of the renewal notice or attached to it in the form of supplementary statements. Motor insurance is at all times evolving. Limitations within policies are extended to meet rising costs, and this is conveyed to the policyholder by notice and by endorsement, normally with the renewal notice. To advise policyholders of an undertaking given to the Department of Transport on the effect of the car sharing provisions of the Transport Act 1978, insurers agreed to issue a statement with all renewal notices for twelve months. Similar agreements with government departments may be made in the future. Since 1977 the Statement of Insurance Practice has required that a renewal notice must draw the policyholder’s attention to his duty of disclosure at this time and specify certain areas, such as convictions, that the insurer considers material and which need to be disclosed. However, it was some insurers’ practice well before 1977 to draw the policyholder’s attention to the duty of disclosure; the Statement of Insurance Practice merely formalised the situation. Instances have arisen where brokers have substituted their own renewal notice for that issued by the insurer, but in the BIBA’s view this is an incorrect and dangerous practice. It is contrary to the Statutory Code of Conduct adopted under the Insurance Brokers (Registration) Act 1977, which states that a broker should send to his client all notifications received from the insurer. It is important that a broker should deliver to the policyholder the renewal notice for the following reasons:
- To give the policyholder the protection of the Road Traffic Act cover note contained in the renewal notice this must be delivered to him so that he may exercise his right to accept the inherent offer in this respect. It is doubtful whether retention by the broker in any way constitutes delivery, in that in these circumstances the broker is most probably acting as agent of the insurer.
- As agent of the insurer the broker must accept his principal’s responsibilities under the Statement of Insurance Practice which include a commitment to draw the policyholder’s attention to his duty of disclosure.
- Attached to or in the wording of the renewal notice could be endorsements affecting the contract between the insurer and the policyholder which require to be adequately delivered and in respect of which motor insurers may have entered into agreements with government departments.
- Without delivery, the policyholder is deprived of his valid proof of his no claim discount entitlement.
