The dramatic cut in the personal injury discount rate to -0.75% has sent shockwaves throughout the insurance industry –
branded “crazy” by the ABI and with a host of industry giants calling for a Government rethink.
However, Kevin Pratt, consumer affairs expert at moneysupermarket.com, has offered a different take on the cut which is expected to increase annual premiums by around £70 per policy, and by as much as £1,000 a year for high-risk younger drivers, by pointing out that insurers should be striking a balance given the recent whiplash reform.
“Following the announcement, insurers were quick to say that the fall-out would be felt swiftly and heavily by car insurance customers,” he said. “At the same time, insurers must demonstrate they are balancing the needs of customers with the requirement to pay full and adequate compensation to those injured in accidents.
“In theory, car insurance prices should be going down as the number deaths and injuries resulting from traffic accidents, and therefore the number and size of insurer pay-outs, is declining. Additionally, the government is pushing through reforms to change the way whiplash claims are handled by the courts with the intention of reducing fraudulent claims, which add around £50 to the cost of every policy.”
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He believes that if premiums do rise – as they almost certainly will – then consumers have the right to a clear explanation.
“We’ve seen prices increase steeply in the past year and, if insurers are to be taken at their word, this will continue through the rest of 2017 and beyond,” he explained.
“Hard-pressed motorists will want to know why premiums only seem to be heading in one direction. With another insurance premium tax increase around the corner in June, insurance companies owe their customers an explanation as to why renewal premiums continue to rocket.”
His comments follow on from
ARAG’s claims that the
insurance industry has “lacked compassion” in its reaction to the cut. However, where do you stand on the discount rate cut? Leave a comment below with your thoughts.
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