Britain paying the price
Britain’s motorists are paying a heavy price for delays in the Government implementing its proposals to reform how personal injury compensation (the Discount Rate) is calculated, the Association of British Insurers (ABI) warns today.
With the price paid for the average comprehensive motor insurance policy having jumped by nine per cent in 2017 to a record high of £481, reforms cannot come soon enough for millions of insurance customers.
The ABI estimates that a UK motorist can now expect to pay on average a total of £31,650 on motor insurance during their driving lifetime. This is up five per cent on 2014. The average motor insurance claim is now £3,106, the highest on record.
The Discount Rate is an adjustment applied to lump sum compensation payments made to people who have suffered serious personal injuries to reflect the likely return on the money when they invest it. It aims to ensure that people are not under or over-compensated.
On 27 February 2017, the then Lord Chancellor reduced the Discount Rate used to calculate compensation for serious personal injuries from 2.5% to minus 0.75% – the lowest rate in the western world – and said that there would be a review of how the Rate should be set in the future.
Following a consultation in September last year, the Government announced proposals to deliver a personal injury compensation system that would be fairer for claimants, customers and taxpayers alike. These would see the framework for setting the Discount Rate better reflect how claimants actually invested their compensation. The Rate would be reviewed at least every three years, with the creation of an independent panel of experts to help advise the Lord Chancellor on future reviews.
James Dalton, director of General Insurance Policy at the ABI, said, ‘It is time to end the uncertainty. One year on from the Government launching a review into what is widely accepted to be a broken system, motorists, claimants and insurers all need to know where they stand. The Government must urgently bring forward relief for motorists by introducing a framework for reform to create a fairer compensation system for claimants, insurance customers and all taxpayers.’
