Further Insurance Increases

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Kwacky
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Further Insurance Increases

Post by Kwacky »

There has been a change in the discount rate for personal injury cases.

When we look at a claim for future losses, we calculate how much that claim is worth for life or for a limited period.

Say if you need care and assistance for the rest of your life. We do a calculation then apply a discount of 2.5% This is on the basis that you get lump sum of cash in your hand, so you can invest it and gain interest on that lump sum.

This morning they changed the discount rate from +2.5% to -0.75% (so we now do the sum then add .75% to it).

The impact means that the insurance companies will now have to pay out more on large value cases. So that means we the customer will be bearing the brunt.


Under the Damages Act 1996, I, as Lord Chancellor, have the power to set a discount rate which courts must consider when awarding compensation for future financial losses in the form of a lump sum in personal injury cases.

The current legal framework makes clear that claimants must be treated as risk averse investors, reflecting the fact that they may be financially dependent on this lump sum, often for long periods or the duration of their life.

The discount rate was last set in 2001, when the then-Lord Chancellor, Lord Irvine of Lairg, set the rate at 2.5%. This was based on a three year average of real yields on Index Linked Gilts. Since 2001, the real yields on Index Linked Gilts has fallen, so I have decided to take action.

Having completed the process of statutory consultation, I am satisfied that the rate should be based on a three year average of real returns on Index Linked Gilts. Therefore I am setting it at minus 0.75%. A full statement of reasons, explaining how I have decided upon this rate, will be placed in the Libraries of both Houses of Parliament. The Statutory Instrument to effect this change will be laid today, and will become effective on 20 March 2017.
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Re: Further Insurance Increases

Post by Kwacky »

https://www.abi.org.uk/News/News-releas ... COUNT-RATE" onclick="window.open(this.href);return false;


Commenting on today’s announcement by the Lord Chancellor of a reduction in the Discount Rate used to calculate compensation awards for serious personal injuries, Huw Evans, Director General of the Association of British Insurers, said:

“Cutting the discount rate to -0.75% from 2.5% is a crazy decision by Liz Truss. Claims costs will soar, making it inevitable that there will be an increase in motor and liability premiums for millions of drivers and businesses across the UK. We estimate that up to 36 million individual and business motor insurance policies could be affected in order to over-compensate a few thousand claimants a year.

“To make such a significant change to the rate using a broken formula is reckless in the extreme, and shows an utter disregard for the impact this will have on consumers, businesses and the wider operation of the insurance market.

“We have repeatedly warned the Government that this could lead to very significant price rises, with younger drivers in particular likely to find it much harder to get affordable insurance. It is also a massive own goal that lands the NHS with a likely £1billion hike in compensation bills when it needs it the least.
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Re: Further Insurance Increases

Post by Cav »

I did see something about them capping "Standard" Personal Injury claims which would likely bring down insurance premiums.. do you think this is likely to offset the rise attributed to the above statement?
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Re: Further Insurance Increases

Post by D41 »

Sounds like you have a fun job.
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Re: Further Insurance Increases

Post by Kwacky »

Cav wrote:I did see something about them capping "Standard" Personal Injury claims which would likely bring down insurance premiums.. do you think this is likely to offset the rise attributed to the above statement?
Yep. They've already capped the costs on low claim personal injury cases and there's been very little reduction in insurance premiums. The problem is it takes a while for those changes to take effect. But the increase in the discount rate means that the insurers have to increase their reserves now, so we'll see an immediate increase.
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Re: Further Insurance Increases

Post by Kwacky »

D41 wrote:Sounds like you have a fun job.
It pays the bills.
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Re: Further Insurance Increases

Post by Kwacky »

Car insurance has risen by 9.4% to an average of £661 due to the discount rate decision. This and the incoming tax rate rises set to hit in June this year are driving up the average price of car insurance.

Recent analysis from Consumer Intelligence shows that the data taken from black boxes is enabling younger drivers to get a better deal on their premiums. Over 50s are paying the least.
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Re: Further Insurance Increases

Post by Cav »

After receiving my insurance renewal quote I felt a bit pee'd off - the renewal was higher than the previous year's premium again.

I did quotes on all the comparison sites yet they were several £££'s more than the renewal quote so I tried calling and saying I was unsatisfied with the quote etc..

..walked away with an £80 saving over last year. Well it's better than a kick in the teeth but Im still £600+ worse off
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Re: Further Insurance Increases

Post by Kwacky »

There's another discussion going on about the discount rate. It's expected to change again for the better, so hopefully insurance will come down a little.

Although I doubt it.
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Re: Further Insurance Increases

Post by Jack »

what furkin idiots are investing in index linked gilts that returns -0.75% over 3 years ?
Surely even depositing in a high interest account would give a positive yield ?
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Re: Further Insurance Increases

Post by Kwacky »

It's taking inflation into account as well as other factors, which is where the -0.75% comes from.

But yeah, agreed, it's fecking stupid.
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Re: Further Insurance Increases

Post by Blade »

The chinks prefer to kill you. If they knock you over its cheaper to reverse back, run you over and kill you than pay for a life times medical care.
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