There are many similarities and difference between auto insurance in the United States and in Europe. We will go over a few of the highlights here. In the United States auto insurance laws and regulations is left up to the individual states. Most states require bodily injury and property damage liability insurance. There are some that are considered no fault states which means personal injury insurance (PIP) is required and will pay for your injuries no matter who was at fault in the accident.

When a driver in US drives out of the state which they are licensed and insured in their insurance extends coverage to the car as it travels through other states and conforms to the insurance laws of that state.

Europe is similar in that the countries each have their own motor insurance laws and regulations but due to the European Union (EU) Directives drivers can take their car out of their country and into other EU countries but still be covered by their insurer for accidents. Each country within Europe has their own insurance requirements as do States within the United States. Most require liability but term it Third Party Liability. Also while the UK is part of the EU they have different laws and regulations then most of the rest of the European Countries.

Anyone with UK car insurance is automatically covered in most of Europe for the minimum legal requirement, as set by individual countries. But this covers only repair to any vehicle or property you hit, or the medical treatment of anyone else injured. To find out more about UK motor insurance, or to get a quote for UK car insurance follow this link.

The geographic location of the car is taken into account as a risk and rate factor in both areas. In the US, one needs to register and insure their vehicle in the state they reside and garage the vehicle and in Europe one must be registered in the country where they reside. This location is part of the rating system of both Europe and the US, as is driving records and claims histories.

The types of insurance that are offered in the US and Europe are similar. The mandated type of insure will vary from state and from one Europe country to the next and the amounts or limits of overages will differ. However the types of insurance in both areas include liability to cover those you may cause damages to in an accident and physical damages coverages to cover your own vehicle.

In many European Countries require auto liability insurance which they refer to as third party liability. It protects you against the cost of property damage and bodily injury that you may cause to others in an accident. This single coverage there it is similar to the separate coverages available in the US of property damage liability and bodily injury liability. In the US you can purchase Combined Single Limit Liability that will include a single limit for both bodily injury liability and property damage liability, this is similar to third party liability.

In Europe, optional coverages that one can purchase include collision, comprehensive, fire/theft/glass and driver personal protection. While most of these coverages are similar to those available in the states, driver personal protection being comparable to personal injury protection (PIP), fire/theft/glass is a coverage that is not normally available in most of the US. It is a first party coverage that protects your car for these specific perils so thus is not as extensive as collision and comprehensive.

Once you have purchased your insurance you receive proof of insurance. In France it is in the form of a certificate you must affix to windshield that is sometimes is referred to as the Green Card. This sticker is proof of insurance for driving throughout France and surrounding European countries. In the US you are given an insurance card that you place within the vehicle to show to law enforcement or others that may request it.

In Europe it is also common to have unlimited liability coverage or such high limits it is practically unlimited. In the US there are limits to policies that are usually set or governed by state laws. There are also several deductible to choose from in both the US and Europe.

The length of polices in Europe are not like the United States where they typically are for 6 or 12 months. In Europe there are markets where insurance contracts can be for up to 5 years. The premium is fixed for this period. A customer must give notice well in advance of their anniversary date to cancel and there is a large fee to cancel this type of policy.

Insurers in the US have rating systems available to them based on the guidelines set up by the Insurance Services Office (ISO). The ISO has been a leading source of information about risk and supply data, analytics, and decision-support services for insurance professionals. The UK uses the Association of British Insurers (ABI) ratings most of Europe does not have such rate making support systems. For example in Germany most insurers use a table which assigns a car group to each make and model not physical damage coverages and liability policies as well.

Even with the EU in place, each country in Europe has its own culture, economy and laws when it comes to car insurance. Similar to the US where each state has its own laws and regulations that guide the coverages, rates and required financial responsibility that must be placed on a vehicle. Just as the US market has constant changes, new regulations, and changes in distribution channels, so do European markets. The rate of change in continental Europe is often more intense than the US. The main cause is the deregulation of rates that is going on throughout Europe.

As mentioned earlier the UK motor insurance market cannot really be grouped together with the rest of Europe. It is difficult to say how the UK is very much like US, except that any companies have very refined rating schemes and underwriting rules driven by a competitive market. Many of the pricing issues that face a US actuary everyday, due to the regulatory processes, are absent in the UK.

Deregulation in Europe means that prices are no longer fixed by a government agency, but by each insurance company individually. A fixed price structure was the rule in Europe (excluding the UK) until the mid-1990s. These prices were often simply called a tariff. Each country had its own distinctive tariff and policy structure with perhaps more similarity between countries with the same language, cultural and legal roots.

In the US rates are regulated by State agencies. Some states governments determine the rates but most States allow insurance companies to file their own rates, however they must be approved by the state. The United States has qualified actuaries determining rates while in Europe there is no requirement for rates to be set by an actuary.

In Europe there are the EU Motor Insurance Directives which are a fundamental element to the free movement of vehicles in the European Union. With the first three Directives, they took fundamental steps towards establishing a single market in the field of motor insurance.

These directives oblige all motor vehicles in the EU community to be covered by compulsory third party insurance and ensure the abolition of border checks on insurance so that vehicles can be driven as easily between Member States as within one country. They also guarantee a better protection of victims of accidents, including those caused by unidentified or uninsured vehicles. All passengers in the vehicle (including the family of the driver) are covered by compulsory insurance.

The third Insurance Directive was meant to remove the major obstacle for the Single Insurance Market and set out the principle that the prices of insurance contracts, including motor insurance, are based on the freedom of tariffs. This principle allows insurance undertakings to assess risks and freely fix their tariffs.

The Fourth Motor Directive provides for an efficient mechanism for settling claims when the accident takes place outside the victim's Member State of residence (visiting victims). And a Fifth directive passed in 2005. Its key elements include items such as increased minimum legal cover for third party personal injury and property damage insurance and claims to be allowed for property damage in cases of unidentified vehicles causing significant personal injury. For more information on the EU directives visit the European Commission site.

So as the States within the US have different state laws regulating and governing auto insurance requirements, rates, etc so do the Countries within Europe. There are a lot of differences between each country in Europe and the US. Different European countries will require different coverage but now also have EU Directives to conform to which states in the US do not have any national directives dictating auto insurance. The types of coverages available to motorist are similar for the most part, third party liability typically being required and first party coverage being optional.

For more information on a certain state’s auto insurance laws you can contact their Department of Motor Vehicles or insurance regulatory body. For information on specific countries and their motor insurance laws contact that country’s agency which governs auto insurance or similar bureaus. For instance information on UK insurance you can contact the Motor Insurers' Bureau (MIB).