When the discount rate reforms were announced just over a week ago, the insurance industry was generally united in its outrage – the Association of British Insurers described the extent of the cut as “crazy”, while several leading insurers also decried the change.
However, now one insurer has spoken out about what it deems to be a “lack of compassion” in the industry and socially irresponsible comments.
In an online blog, legal expenses insurer ARAG examined the reform, which will see the discount rate applied to serious injury claims reduced from 2.5% to -0.75%, as well as the subsequent media reaction, alongside changes to the claims process for whiplash injuries, including fixed awards and an increase of the small claims court limit to £5,000.
It noted that in the case of whiplash reform there is a risk it will “severely limit access to justice for many quite genuinely injured motorists,” while also having “major consequences for the courts and parts of the legal profession “while probably failing to hit its questionable target of claims fraud.”
The discount rate cut meanwhile, was dubbed “long overdue”, with the company describing the reaction as a “level of response usually reserved for major natural disasters.”
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It contrasted the two changes, noting the speed at which whiplash reforms were pushed through, by contrast to the discount rate cut which took nearly five years to implement.
“One would be forgiven for thinking that the change to the “discount rate” applied to large personal injury awards, came entirely out of the blue,” it wrote. “While the extent of the swing may have surprised many, the original MoJ consultation on the inadequacy of the existing formula, unchanged in over 16 years, closed in the summer of 2012.”
It added that the Lord Chancellor was only compelled to change it now “under threat of judicial review.”
In addition, it highlighted contrasting media coverage noting that whiplash reforms were “barely mentioned outside the insurance and trade press” whereas the discount rate adjustment “prompted a succession of articles across the mainstream media.”
It concluded that “all the wailing about premium hikes” missed the mark because the victims of motor accidents are often customers too, some facing injuries that affect the rest of their lives.
“Those who will hopefully benefit from the discount rate reform are among the most vulnerable in our society,” the blog stated. “Children injured at birth and motorists left paralysed after an accident may now have the money to fund their care adequately, as they age.
“The clamour to denounce this as “crazy” looks neither compassionate nor compatible with the social responsibilities that most modern businesses claim to uphold.”
What do you make of the discount rate reaction? Has it been justifiable given the extent of the cut and its impact on the industry; or has it highlighted a lack of compassion as the blog suggests? Leave a comment below with your thoughts.
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