“The Lloyd’s market is very disappointed with the result of the first review of the Personal Injury Discount Rate under the new statutory process set out in the Civil Liability Act 2018, which has marginally adjusted the rate from minus 0.75% to minus 0.25%. Whilst the change is positive for compensators, such a small movement that retains a negative rate is a severe disappointment and well below the level underwriters were expecting. The new rate will sustain the vast majority of reserving costs that were imposed on the insurance industry when the rate was previously changed from +2.5% to minus 0.75% in 2017. The highly competitive nature of our industry means that reductions in costs will quickly influence premiums. However, this positive but small change is unlikely to lead to substantial price reductions for policyholders.
“We await further information from the Lord Chancellor so that we can understand the reasoning in more detail and the statutory Impact Assessment should make interesting reading. We are surmising that the Government Actuary has given a very negative view on the wider economic factors that are assessed as part of the new rate-setting mechanism.
“The Lord Chancellor’s statement also makes reference to a future consultation to explore setting a dual rate, which we have long advocated. We will await this consultation with interest, as this route may be the only prospect in the short-term that could provide some relief to motor and casualty insurance customers now facing sustained pressure on premiums.”
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