APIL: 'Shameless' insurers can't sink much lower
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War of words heats up between lawyers and ABI ahead of discount rate review
The Association of British Insurers has ‘turned its guns’ on innocent injury victims in a ‘sickening’ attempt to deflect blame for the rising cost of motor premiums away from its members, claimant lawyers have declared.
In an announcement today, the insurance industry body revealed motor premiums had hit a record high in the last quarter, rising more than five times the rate of inflation in 2016. The average price paid for private comprehensive insurance was £462.
The ABI blamed the increase on tax rises, higher repair fees, and the costs of whiplash injuries. The insurance industry added that the Ministry of Justice’s imminent review and a potential cut of the personal injury discount rate would ‘throw fuel on the fire’.
The rate relates to the discount applied to compensation payments to offset the accumulation of interest, net of income tax and inflation, from the investment of the compensation, such as in a bank or building society. Claimant lawyers argue that people with life-changing injuries face a shortfall in their compensation because the discount rate is too high.
Rob Cummings, the ABI’s head of motor and liability, said: ‘These continue to be tough times for honest motorists. They are bearing the brunt of a cocktail of rising costs associated with increasing whiplash-style claims, rising repair bills, and a higher rate of insurance premium tax.
‘While we support the government’s further reforms to tackle lower-value whiplash costs, it must not give with one hand and take away with the other. The sudden decision to review the discount rate has the potential to turn a drama into a crisis, with a significant cut throwing fuel on the fire in terms of premiums.’
However, claimant lawyers hit back at the insurance industry’s ‘shameless’ announcement. ‘For insurers to try to deny these people their very real need for compensation with the threat of higher car insurance premiums is a sickening tactic to shift the blame for the industry’s failure to control premiums,’ said Neil Sugarman, president of the Association of Personal Injury Lawyers.
Sugarman explained there was nothing ‘sudden’ about the long-overdue review of the discount rate, which has not been changed since 2001 when interest rates were much higher than in recent years. ‘Insurers have got away with undercompensating people with catastrophic injuries for years and they know it,’ said the APIL chief.
‘There are some public and private sector compensators, including the NHS Litigation Authority and Direct Line, who have managed to account for the likelihood of a change to the discount rate when determining their reserves for future liabilities. Excuses from the ABI that the insurance industry has not had chance to prepare for a new rate do not wash.’
The president continued: ‘For insurers to treat injured people as a mere nuisance is nothing new. Latest data from the ABI is a shameless “pick n’ mix” of figures which obscure the long-established fact that personal injury claims are not the reason for rising premiums.
‘The ABI’s own data shows that the costs of motor-related injury claims have been falling since 2013. But the ABI cannot sink much lower than it has right now. It has turned its guns on people with disabilities and life-long care needs, the result of needless injuries inflicted by their members’ policyholders. Clearly the ABI would rather insurers did not honour their responsibilities to pay full and fair compensation.’
The ABI launched a judicial review last year to challenge the Lord Chancellor’s decision to review the discount rate. The High Court dismissed the challenge in January. The ABI said it was seeking permission to appeal the ruling.
John van der Luit-Drummond is deputy editor of Solicitors Journal