What products are affected by this change in the discount rate?

The discount rate is used to calculate payments made under motor and liability policies. A change in the rate from 2.5% to -0.75% will cause a significant increase in the cost of claims. This means the change has implications for around 36 million motor insurance policies, covering both domestic and commercial vehicles. It also affects insurers who provide employer’s liability cover and those who sell public liability insurance to businesses.

Public authorities who pay compensation, such as the NHS, will also be affected and will see their compensation bills increasing significantly at a time when their budgets are already under severe strain.