Commenting on today’s announcement by the Lord Chancellor of 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.
“We need a fairer deal for consumers and claimants. We cannot wait until Easter - the Ministry of Justice must commit to alternatives immediately so changes to the law can be included in the Prison and Courts Bill.”
Find out more about the Discount Rate here.