Lord Hunt leads lobby to challenge regulation that will cost insurers £18m

Infuriated insurers are set to lobby the Health Department over increased NHS charges that will cost the industry at least £18m a year for the foreseeable future.

The Road Traffic (NHS Charges) Amendment Regulations 2001, came into force on 28 January.

It sets out how the NHS will recover monies from insurers to pay for the treatment of road traffic casualties.

Today, Lord Hunt of the Wirral called on the House of Lords to annul the new regulations, blasting the Health Department's lack of consultation with the insurance industry and the retrospective nature of the charges.

Meanwhile, Association of British Insurers (ABI) director general Mary Francis has written to the department to express the ABI's "disappointment" over the way the new regulations were introduced.

The regulations raised the maximum tariff insurers could be charged from £10,000 to £30,000 when the casualty is admitted to hospital .

The charge for when the casualty is treated, but not admitted, was raised from £354 to £402.

An ABI spokesman said insurers accepted their responsibility under the Road Traffic Act to pay for such treatment but "we've written collectively to express our disappointment in the way it's come about".

It is understood major insurers have also written individually to the department about the issue.

Lord Hunt, a senior partner at Beachcroft Wansbroughs, said: "My point will be to protest about the lack of consultation and to say that the motor insurance industry is perfectly ready to meet its responsibilities, but not to have retrospective taxation imposed on it."

He wants to have the regulations annulled and "proper consultation" to be undertaken.

However, in a letter to the ABI, the Health Department wrote that, given that insurers take an average of 18 months to settle personal injury claims that include NHS charges, the industry would not feel the effect of the higher tariffs until 2003.

It also said that £30,000 represented about 60 days in hospital, while most seriously injured patients stay for an average of 128 days.

"Thus, insurers are still being relieved of the costs of the most severely injured patients," the letter said.

However, Lord Hunt pointed out that insurers had to reserve for future liabilities as they were incurred, which meant the raised tariffs would have an immediate effect.

The regulations are the fifth heavy judicial or statutory charge to have a retrospective impact on insurers, which have cost the industry just under an estimated £1bn.

The industry paid a one-off £450m when the Ogden discount rate was reduced from 4.5% to 3% in 1998 and another one-off £160m when damages for pain and suffering were increased in 2000.

It also paid £100m when statutory provision was made for defendants to bear the cost of success fees, and a further £225m when the Ogden rate was reduced again to 2.5%.