On 27 February the Lord Chancellor announced a reduction in the Discount Rate used to calculate compensation awards for serious personal injuries, Huw Evans, Director General of the Association of British Insurers, said:
“Cutting the discount rate to -0.75% from 2.5% is a crazy decision by Liz Truss. Claims costs will soar, making it inevitable that there will be an increase in motor and liability premiums for millions of drivers and businesses across the UK. We estimate that up to 36 million individual and business motor insurance policies could be affected in order to over-compensate a few thousand claimants a year”.
“To make such a significant change to the rate using a broken formula is reckless in the extreme, and shows an utter disregard for the impact this will have on consumers, businesses and the wider operation of the insurance market”.
“We have repeatedly warned the Government that this could lead to very significant price rises, with younger drivers in particular likely to find it much harder to get affordable insurance. It is also a massive own goal that lands the NHS with a likely £1billion hike in compensation bills when it needs it the least”.
The ABI and 15 insurance bosses were involved in discussions at Downing Street on 28 February and a statement was subsequently issued confirming that government will progress urgently with a consultation on the framework for setting future rates, and bring forward any necessary legislation at an early stage. Huw Evans confirmed that the insurance industry would contribute fully to the upcoming consultation, whilst the government advised it would carefully consider all evidence and arguments submitted. All parties stated that claimants must get the money that they are entitled to following an injury in order to support their future needs.