UK claims managers and insurers indicate strong appetite for an increase in the contentious rate
A poll conducted by BLM, the UK’s leading insurance and risk law specialist, has revealed that nearly two thirds of claims managers and insurers considered that the discount rate would settle between 0 – 1 per cent.
The survey, conducted as part of a Discount Rate webinar hosted by the firm, also found that three in ten would opt for an increase to 1 – 2 per cent instead. Only 1.6 per cent of those polled believed the rate would settle at the previous level of more than 2 per cent.
With the rate slashed from 2.5 per cent to minus 0.75 per cent in February 2017, insurers and claims handlers were quick to speak out against the change, which has substantially added to the costs of claims. These costs feed through to consumers and businesses as increased motor and liability premiums.
The survey confirms what seems to be a widespread expectation among stakeholders that the rate will be altered. Alistair Kinley, Director of Policy & Government Affairs at BLM said: “While the result of our survey may be unsurprising, given the largely defendant audience, it is really striking that around two thirds of them believe that a new, positive discount rate needs to be put in place urgently.
“The Government’s recent discount rate consultation was about the principles of setting the rate, such as the 100% compensation approach and ensuring fairness for claimants and defendants. A really key aspect is the underlying investment assumptions for damages. While now have an indication of where our audience believes the rate will settle, what’ll be interesting to learn more about is whether the Government is considering new benchmark investment assumptions and what effect those would have on the discount rate.
“We know that the discount rate is high on the Government’s agenda, with Justice Minister Lord Keen confirming this month that ‘an announcement of the Government’s conclusions will be made at the earliest possible opportunity.’ And we think it’s a very realistic prospect that those conclusions, when announced, will point to new legislation - most likely the Civil Liability Bill from the recent Queen’s Speech.”
The webinar was attended by over 70 representatives from some of the UK’s leading insurance organisations.