Huw Evans dubs discount rate decision “reckless in the extreme”
ABI director general Huw Evans has hit out at this morning’s decision to cut the personal injury discount rate to -0.75%, calling it “crazy” and “reckless in the extreme”.
Lord Chancellor Elizabeth Truss announced the cut this morning. It is likely to cost the insurance industry billions of pounds, and some insurers have already started revealing the impact to them.
Evan 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.”
He added: “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.”
In her announcement avbout the discount rate decision this morning, Truss said she recognised the impacts on insurers and said that the Chancellor of the Exchequer would meet insurance representatives to discuss the situation.