The Lord Chancellor's recent decision to change the discount for personal injury payouts from 3% to 2.5% could mean insurers have to increase future loss reserves by up to 9%, according to insurance solicitors.
Silverback Rymer partner Keith Popperwell said the adjustment in the discount rate, which allows for claimants' future capital investment, meant insurers would be forced to boost reserves.
These are divided into two parts: those that run through the claimant's lifetime, such as costs of care and accommodation, and those that will run through the victim's working life to age 65 and include loss of earnings.
Popperwell said the sector most badly affected would be the lifetime loss category.
He said: “It's not possible to identify an overall uplift in reserves, because each case will have a different future loss.
“But having done a review for a couple of clients, the concern is that in a case of more than £100,000 payout, the extra cost will be between £6,000 and £8,000.”
Test cases taken to the House of Lords had argued it should be assumed that accident victims would invest their compensation in government securities, rather than more risky equities.
The adjustment to the discount rate means claimants will now be entitled to larger lump-sum payouts.
