Reaction to yesterday’s change to the personal injury discount rate is continuing to pour in, with insurers, law firms, trade groups and other organisations split on whether the UK government went far enough.
Justice minister and lord chancellor David Gauke set the discount rate at -0.25%. It was previously set at -0.75 in 2017.
Read all of the reaction below.
Insurer and insurance industry group reaction
Association of British Insurers
Huw Evans, director general of the Association of British Insurers, said: “This is a bad outcome for insurance customers and taxpayers that will add costs rather than save customers money. A negative rate maintains the fiction that a claimant and their representatives will knowingly choose to invest their damages in a way that would guarantee losing them money.”
“This will remain the lowest discount rate in the Western world, leaving England and Wales an international outlier at a time when we need to boost our attraction to international capital.”
International Underwriting Association
Dave Matcham, chief executive of the International Underwriting Association, said: “The new methodology for calculating the personal injury discount rate promised to introduce a much fairer and more realistic assessment of investment strategies. This was widely expected to result in a figure of between zero and 1%, which indeed, was the indication given by former lord chancellor David Liddington in a statement to the House of Commons in September 2017, when the process of reform began.”
“We have always supported a rate which fairly reflects the ‘100% compensation principle’, ensuring claimants are put in neither a lesser or more advantageous position than any ordinarily prudent investor favouring a low-risk investment approach. The government’s statement today, however, indicates that a rate of minus 0.25% leaves a claimant twice as likely to be over-compensated than under-compensated.”
“The likely effect will be to drive up the cost of insurance for policyholders across the market.”
LV=
Martin Milliner, LV= General Insurance claims director, said: “LV= has always been committed to providing the fairest possible settlements to our most seriously injured road users. Today’s announcement whist replacing the absurd and fiscally irresponsible decision to cut the Ogden Discount Rate to -0.75%, doesn’t in our view go far enough.”
“At this level we believe that claimants will remain over-compensated, thus undermining the common law principle of 100% compensation. This means that uncertainty will remain for claimants, lawyers and compensators alike as this rate will be surely challenged once again at the next review in five years’ time.”
AXA Insurance
David Williams, managing director of underwriting and technical services at AXA Insurance, said: “The lord chancellor’s announcement today is disappointing to say the least and doesn’t provide the equality of compensation that we would have hoped for and expected.”
“A negative rate simply does not reflect the economic reality of the investment opportunities for those receiving lump sum payments and, whilst reform was certainly needed to ensure fair compensation for accident victims, the rate announced today causes other problems.”
“-0.25% is below the level that most commentators were expecting, below the rate insurers have been using for pricing, and below the level most claims have been settling at whilst we awaited