Insurance industry lobbyists are gearing up for a summer campaigning against the latest discount rate applied to personal injury settlements – including a possible legal challenge.
The Association of British Insurers says that motor insurance premiums have crept up, with cover set to be more expensive in the wake of the Ministry of Justice setting a new rate of -0.25%. This means that the court will top up compensation for personal injury victims, a far cry from the pre-2017 deduction of 2.5% to take account of presumed interest earnings.
The Gazette understands that lawyers are examining whether or not to apply for judicial review of the decision of former lord chancellor David Gauke. Last week, ABI general insurance policy director James Dalton told Insurance Insider that ‘all options are on the table’, and insurance chiefs believe they can show that the lord chancellor miscalculated the rate by setting it too low.
One of the biggest contentions is that Gauke based his decision on an impact assessment which estimated that insurers were settling claims on the basis of the - 0.75% rate laid down by his predecessor Liz Truss. The ABI insists that the majority of cases were settled out of court without that rate ever being applied.
In an open letter to Gauke, ABI director general Huw Evans said the impact assessment, which calculated that insurers benefited to the tune of £320m a year, was ‘misleading and wholly disingenuous’, adding that it ‘completely misrepresents insurance market pricing and reserving in response to the setting of the previous minus 0.75% rate and omits to mention ministerial decisions since 2017 designed to ensure the minus 0.75% rate was not widely adopted’.
Mark Shepherd, ABI’s assistant director and head of general insurance policy, said: ‘The recent decision on the discount rate is bad news for motorists that will simply add to insurers costs rather than save customers money, at a time when vehicle repair bills and theft claims are rising.’