When the discount rate was cut to -0.75% a year ago, the industry took to social media to vent its frustrations. Insurance Times looks back at the industry reaction.
While most of the UK was focused on Brexit, an astounding Oscars mix up, Storm Doris, and an eerie lack of Donald trump tweets, insurers had something else on their minds.
27 February was a cold Monday morning and insurers were glumly awaiting an announcement from justice secretary Liz Truss. The discount rate, which had been set at 2.5%, was going to be cut. Most of the industry expected it to drop to around 1% and many set their reserves anticipating this.
However, Truss dropped a seismic shock on the insurers, announcing that the rate would be set to -0.75% rather than the 1% that some had felt pessimistic to be predicting. A bleak Monday turned into a nightmare, as insurer profits and share prices plummeted.
The industry turned to social media to vent its frustrations:
James Dalton, Director of General Insurance Policy at ABI saw the decision as “absolute madness”.
It wasn’t just Dalton tweeting from the ABI. Director general Huw Evans also took to social media to protest over the “crazy” decision.
Cutting the discount rate to -0.75% is crazy. Claims costs will soar: there will inevitably be increases in motor & liability premiums https://t.co/rMG1ogEVGb— Huw Evans (@huwevans71) February 27, 2017
Donna Scully, MD of Carpenters Law, sought balance, highlighting the confusion of motorists over the government’s strategy.
If I am a genuine motorist, I am totally confused by raft of proposals on Whiplash & discount rate issued in last few days. Utterly baffled.— Donna Scully (@Donna_Scully) February 27, 2017
Can’t ignore plight of seriously injured too. Long time without review but how can you reserve & price on such short notice?— Donna Scully (@Donna_Scully) February 27, 2017
Aviva intermediaries managing director Phil Bayles jumped online to point out that while a negative discount rate might lead to bigger pay outs for claimants, it would put a strain on the NHS and pull motorists’ purse strings tighter due to higher premiums.
Meanwhile, Charlotte Halkett, who at the time was working for Insure The Box, tweeted her concerns that young drivers would be hit the hardest.
However, while insurers vented and lobbied, lawyers rejoiced.
The Association of Personal Injury Lawyers (APIL) released this tweet:
Severely injured people need and deserve the discount rate reduction. APIL welcomes this recognition from the Lord Chancellor #discountrate— APIL (@APIL) February 27, 2017
Mark Harvey, Head of Specialist PI at Hugh James law firm questioned how long the rate had been too high.
Such large cut in #discountrate begs the question for how long have seriously injured victims been under compensated?— Mark Harvey (@markharvey54) February 27, 2017
Some lawyers were more creative than others. Case in point: Andrew Twambley, director of Injury Lawyers 4 U and Access To Justice spokesperson.
This morning, at The ABI…………….. pic.twitter.com/g7rCYcYI6R— andrew twambley (@twambley_a) February 27, 2017
In addition, The Law Society Gazette’s editor John Hyde suggested that the BBC and others reporting on the change had missed the mark
Despite the shock, pockets of the insurance industry managed to maintain a sense of humour.
New personal injury discount rate of -0.75%. There isn’t a column for that in #Ogden. I will perform extrapolations for food.— Paul Widger (@paulwidger) February 27, 2017
Some industry tweeters suggested Liz Truss had read out the wrong rate. Two nights before, La La Land had been mistakenly awarded Best Picture over Moonlight at the Oscars.
27 February 2017 was a landmark day for insurers, as the discount rate was sliced to -0.75%. The financial impact would be borne heavily by the industry and is expected to cost billions. The next day, fifteen of the UK’s biggest insurers’ chief executives met with chancellor Philip Hammond to call on him to intervene. Since then, the ABI and the industry have lobbied for reform, but there has been no change yet, with a general election and other delays slowing the process.