In the UK, auto insurance is called car or motor insurance. As in the US where insurance companies must obtain a license from every state in which they propose to offer policies, all insurance companies are regulated in the UK and have to prove a minimum capital before they are allowed to sell policies.

Car insurance has been compulsory since 1930 and all drivers commit an offense if they drive without insurance, but there is no need for drivers to carry direct proof of insurance with them on the roads (although the display of the so-called tax disk is proof that insurance was held at the time the owner paid the tax). If stopped by a police officer, drivers are required to produce their current policy at a police station within three days.

That said, the basic principles of insurance are the same with three basic types of policy:

(i) third party minimum — the basic legal requirement matching liability policies in the US except that the amounts covered are not capped — UK drivers do not have to make up a shortfall if damages awarded are higher than a policy limit;

(ii) third party, fire and theft — the basic plus cover against damage caused by fire and loss through theft; and

(iii) comprehensive policies include most of the US coverage in a single package.

The single most important difference between the two systems is the institution called the Motor Insurers Bureau (MIB) which compensates victims where either the driver is uninsured or the driver is unknown, e.g. in a hit-and-run accident. Every UK insurance company pays a levy into a fund administered by the MIB. Those injured claim from the MIB which pays out from the fund. This avoids the need for individual drivers to carry their own insurance against uninsured drivers. It also allows injured pedestrians and the owners of property damaged to claim.