The government will “progress urgently” with the consultation on changing the way the discount rate is set, according to a statement issued yesterday by Philip Hammond, the Chancellor of the Exchequer, and Association of British Insurers (ABI) director-general Huw Evans.
Lord Chancellor Liz Truss only announced on Monday that the meeting would happen, without indicating that it would be within 48 hours.
The insurance industry has reacted with fury to her decision to slash the rate from 2.5% to -0.75%, with Mr Evans dubbing it “crazy”.
The CEOs of AVIVA, Direct Line Group, Admiral Group, Zurich, AIG Europe, RSA Group, AXA, LV=, Allianz, Ageas, Esure, Markerstudy, Swiss Re and Hiscox, along with the CEO of the British Insurance Brokers Association all took part in the meeting with Mr Hammond and Simon Kirby, economic secretary to the Treasury.
Insurers have predicted that premiums for young drivers could rise by up to £1,000 a year, and that the change could cost the NHS around an extra £1bn a year in compensation bills.
There was no sign of claimants or their representatives at the meeting to explain the other side of the argument.
The joint statement said: “Claimants must get the money they’re entitled to following an injury in order to support their future needs. It is important that going forward, personal injury discount rates are set at a level that is fair to both claimants and consumers.
“The government will progress urgently with a consultation on the framework for setting future rates, and bring forward any necessary legislation at an early stage. The industry will contribute fully to the upcoming consultation, and the government will carefully consider all evidence and arguments submitted.”
Speaking ahead of the meeting, Mr Evans said: “It makes no sense to do something that will inevitably pile costs onto motorists, businesses and taxpayers at such a difficult time based on a broken formula.”
In an interview afterwards with insurance trade publication Post, he said the insurers had urged Mr Hammond to set a new rate within a year, adding: “The industry did ask for the rate to be stopped altogether, but we were given no comfort on that at all. The statutory instrument had already been laid in Parliament yesterday ahead of the meeting.”
However, the Ministry of Justice consulted on the methodology behind the discount rate in 2013 as part of the lengthy process that culminated in Monday’s announcement. It is not clear what has changed, except unhappiness with the outcome from paying parties.