Two more leading insurers have posted an increase in first-half profits, shrugging off the discount rate change affecting personal injury compensation payments.
In the first half of 2017, Aviva grew operating profit by 11% to £1.46bn and pushed up its interim dividend 13%, despite reporting a £475m hit from March’s change in the discount rate from 2.5% to -0.75%. Operating profit from UK motor insurance increased 9% to £580m. The company said motor growth had been driven by ‘significant’ rate increases ’to match increased claims inflation as a consequence of the change in Ogden [discount] rate’.
At AXA, meanwhile, income from personal motor insurance grew 8%, with underlying profits up 4%.
Claimant solicitors argue that a clutch of bullish trading figures posted by insurers this week suggests there is no need to reverse the discount rate change, a U-turn for which the insurance lobby has lobbied hard. The result of a government review of the change was expected today, but the Ministry of Justice now says it will be announced in ‘due course’.
’AXA and Aviva haven’t missed a trick in blaming everything and everyone else for insurance premium rises – whiplash, fraud, insurance premium tax, the discount rate – but today we can see the real reason in black and white,’ commented Tom Jones, head of policy at claimant firm Thompson Solicitors. ‘Yet another boost in profits and yet more payouts for their shareholders.’
However, AXA UK's chief executive Amanda Blanc said her company is facing ‘strong headwinds’ including rising claims costs across all motor classes in a sector ‘blighted by the compensation culture’. She added: 'The impact of spurious whiplash claims and the activity of claims management companies already place intense inflationary pressure on motor premiums and we continue to work with the government and the wider industry to combat this.’