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The industry was stunned earlier this year when the government radically changed the formula used to calculate the size of large, lump-sum compensation payments. The change to the formula — known as the Ogden discount rate — will drive up costs for the insurance industry and the NHS.
Shortly after the change was announced, chancellor Philip Hammond promised an urgent review of the rules.
But the future of that rethink is now under threat as the June general election looms, leaving insurers and the NHS potentially facing a longer period of higher payouts than they had expected.
“Any change might have to be made via legislation, and it might not be first on the new government’s list of priorities,” said Peter Walmsley, a partner at law firm Clyde & Co.
“This has a significant impact on insurers. Claims have rocketed in value since the rate was changed. There is a widespread recognition that the rate is unrealistic and unfair,” he said.
Last month the government launched a consultation on the future of large personal injury claims. It asked for views on how these claims — which are often caused by car accidents — should be calculated, and who should be in charge of the process. Responses are due in by May 11.
The insurance industry was hoping that the consultation would be quickly followed by concrete proposals. Those proposals could potentially have been included in the Prisons and Courts Bill, which had been making its way through parliament.
But that bill — which also included changes to rules covering whiplash claims — has been derailed because of the election, and it is unclear when, or even if, it will come back to parliament.
Full article on Financial Times (subscription required)