The Financial Ombudsman reminds that due to the increase in the minimum wage, penalties for not having compulsory insurance have increased since January 2022.
At the beginning of 2022, along with the increase in the minimum wage, there was also an increase in the penalty fee for not having motor third-party liability insurance (MTPL), as well as for not having third-party liability insurance of farmers being the owners of a farm (farmer’s third-party liability insurance) and insurance of buildings forming part of a farm against fire and other fortuitous events (insurance of agricultural buildings).
The lack of continuity in insurance cover may result not only in a financial penalty, but is primarily associated with the need to cover the costs of redressing the damage (in the case of third-party liability insurance contracts) and the lack of compensation in the case of events resulting in damage to buildings.
In the case of motor third-party liability insurance, the amount of the penalty fee for not having insurance depends on:
1. Vehicle type
- for passenger cars, it is the equivalent of 2 times the minimum wage
- for trucks, tractors and buses, it is the equivalent of 3 times the minimum wage
- for other vehicles, it is the equivalent of 1/3 of the minimum wage
2. The period of time without insurance cover in a given calendar year:
- up to 3 days – 20% of the full penalty fee
- from 4 to 14 days – 50% of the full penalty fee
- more than 14 days – 100% of the penalty fee
In order to avoid any unpleasant situations, particular attention should be paid in cases where the regulations of the Act on Compulsory Insurance, the Insurance Guarantee Fund and the Polish Motor Insurers’ Bureau, which provide for an automatic extension of insurance cover, the so-called prolongation clause, do not apply to our agreement.
As a reminder, the cases when there is a break in the continuity of MTPL insurance resulting in the imposition of penalties by the Insurance Guarantee Fund (UFG) are provided below. These include:
- When the contractually agreed premium for the past period has not been paid in full – this usually occurs when the vehicle owner pays the premium in instalments, but also when the premium – despite the contract – is not paid at all. In this situation, the prolongation clause does not apply (the contract will not be renewed for another 12-month period). Therefore, before the end of the contract period, it is worth checking whether the premium has been paid in full (if in doubt, contact your insurer).
- Where the insurance company ceases to be authorised to carry on insurance business in respect of compulsory motor third-party liability insurance. The prolongation clause is not applicable in this situation either.
- The vehicle is sold and the buyer of the vehicle decides to use the valid policy of the seller of the vehicle, but does not take out a new policy on their own behalf after its expiry. As the law now stands, the contract entered into by the seller will not be automatically renewed at the end of the period for which it was signed. In such a situation, it is necessary to enter into a new contract for a new period in order to maintain continuity in the coverage.
- An MTPL insurance contract is entered into by the holder of a motor vehicle who is not the owner of that vehicle. The rights and obligations of that holder under the insurance contract entered into are transferred to the owner of the motor vehicle as soon as the holder has ceased to possess the vehicle for the benefit of the owner. However, the insurance contract entered into by the holder is terminated at the end of the period for which it was signed. The clause providing for the automatic renewal of the contract will not apply in this case either.
- In the case of a declaration of bankruptcy of the insurance company, a declaration or order to wind up the insurance company, or rejection of a bankruptcy petition or discontinuance of bankruptcy proceedings. In this situation, the prolongation clause does not apply (the contract will not be renewed for another 12-month period).
Regardless of cases of non-renewal of the insurance contract by operation of law, particular vigilance must be exercised when there is a transfer of ownership of a vehicle but the seller has not provided the buyer with a valid MTPL insurance contract. When buying a vehicle, the buyer should immediately (on the same day) verify the data in the UFG database and, in the case of confirming the lack of a valid contract, insure the vehicle on the day of acquiring the ownership and not later than when putting the vehicle into use. Analogous principles apply to the transfer of possession of a vehicle. In addition, the buyer, having received the MTPL insurance contract from the seller, in order to be sure, should contact the insurer to confirm the validity of the contract.
A change in the penalty fee for not having insurance will also apply to third-party liability insurance of farmers being the owners of a farm (farmer’s third-party liability insurance)and insurance of buildings forming part of a farm against fire and other fortuitous events (insurance of agricultural buildings). Both types of insurance are compulsory.
The penalty fee for not having a third-party liability insurance contract is also calculated based on the minimum wage. The penalty fee for not having farmer’s third-party liability insurance is 1/10 of the minimum wage in the year of inspection, and for not having insurance of agricultural buildings 1/4 of the minimum wage.
In the case of farmer’s third-party liability insurance and in the case of insurance of agricultural buildings, there is a similar principle of automatic renewal as in the case of MTPL insurance. If the farmer does not give written notice of termination to the insurance company not later than one day before the expiry of the 12-month period for which the insurance contract was concluded, a new contract will be deemed to have been concluded for further 12 months.
As a reminder, the exceptions to this rule, i.e. cases when there is a break in the continuity of farmer’s third-party liability insurance and insurance of agricultural buildings, resulting in the imposition of penalties, are provided below. These include:
- When the contractually agreed premium for the past 12-month period has not been paid. In this situation, the prolongation clause does not apply (the contract will not be renewed for another 12-month period). Therefore, before the end of the contract period, it is worth checking whether the premium has been paid in full (if in doubt, contact your insurer).
- Where the insurance company ceases to be authorised to carry on insurance business in respect of compulsory farmer’s third-party liability insurance. In this situation, the prolongation clause does not apply either (the contract will not be renewed for another 12-month period).
- In the case of a declaration of bankruptcy of the insurance company, a declaration or order to wind up the insurance company, or rejection of a bankruptcy petition or discontinuance of bankruptcy proceedings. In this situation, the prolongation clause does not apply either (the contract will not be renewed for another 12-month period).
- There is a transfer of possession of a farm. In the case of transfer of possession of a farm (also by inheritance), the buyer may use the existing farmer’s third-party liability insurance contract and the insurance contract for agricultural buildings until the end of the period for which they were concluded, however, they will not be automatically renewed in the case of inheritance.
IMPORTANT: Where a farmer gives possession of a part of a farm which constitutes a separate farm, the person who takes possession of the part of the farm given up does not benefit from any insurance contract hitherto concluded. Such person is obliged, as soon as they take possession of that part of the farm, to enter into a new insurance contract.
It is also worth remembering that the obligation to enter into a farmer’s third-party liability insurance contract arises on the day of taking possession of a farm, and an insurance contract for agricultural buildings on the day of covering the building with a roof.
Thus, as in the case of acquisition of ownership or possession of a motor vehicle, it is of the utmost importance to establish whether the previous holder has complied with the obligation to enter into both contracts.
Also, if the existing contract is terminated, continuity of insurance must be maintained by entering into another contract.
