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The Association of British Insurers has attacked the “crazy decision” of the government to cut the discount rate used to calculate compensation for personal injury claims which it says will push up premiums and result in costs of £1bn for the National Health Service.
Huw Evans, director general of the ABI, said: “Cutting the discount rate to -0.75 per cent from 2.5 per cent is a crazy decision by Liz Truss [the Justice secretary]. 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.”
The government on Monday said the discount rate, used to calculate personal injury compensation payments, would be lowered from 2.5 per cent to minus 0.75 per cent.
The ABI estimated up to 36m individual and business motor insurance policies could be hit with higher premiums to pay for the increase.
“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,” Mr Evans said in a statement.
“It is also a massive own goal that lands the NHS with a likely £1bn hike in compensation bills when it needs it the least.”