Philip Hammond held an emergency meeting with the heads of Britain’s biggest insurers yesterday in an attempt to stop what they described as a “crazy” decision to raise personal injury payouts, lifting the cost of car insurance for young drivers by more than £100.
In a statement last night, the chancellor agreed to launch an “urgent” consultation after meeting the bosses of 15 motor and commercial liability insurers to head off threatened legal action.
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The executives were reacting to the decision by Liz Truss, the justice secretary and lord chancellor, to change the formula used to calculate personal injury payouts and cut the discount rate from 2.5 per cent to -0.75 per cent.
The insurance chiefs, who included Stephen Hester, of RSA, Mark Wilson, of Aviva, David Stevens, of Admiral, and Paul Geddes, of Direct Line, warned the chancellor that the average cost of cover for young motorists would increase by £125 to £1,650, putting it beyond the reach of many people. Estimates also suggest that the reform could cost the NHS about an extra £1 billion a year in compensation bills.
In a joint statement Mr Hammond, and Huw Evans, director-general of the Association of British Insurers, said: “Claimants must get the money they’re entitled to following an injury in order to support their future needs. It is important that going forward, personal injury discount rates are set at a level that is fair to both claimants and consumers.
“The government will progress urgently with a consultation on the framework for setting future rates, and bring forward any necessary legislation at an early stage.”
Mr Evans has warned the government previously that “it should commit to urgent reform of the law before this crazy decision becomes a reality”.
Source: The Times