On the 27th February, The Lord Chancellor announced a change to the discount rate applied to Personal Injury Claims. This discount was used to offset the difference between the payout by the insurance company compared to what could be earned by investing the lump sum.
For example, if a court awarded a settlement of £1,000,000 to cover long term care, this amount would be discounted by 2.5% resulting in a payment by the insurance company of £975,000. This amount could be invested, and the return on the investment should meet the difference between the amount paid out and the original award.
The Lord Chancellor announced that this discount rate would change from the current 2.5% to a load of 0.75% to be effective from 20th March 2017. This also affects all current outstanding claims as well as new claims.
So in our scenario above the payment made by the insurer would be £1,007,500. This may look like a small amount, but you need to compare the difference between the amount that would be paid out when the discount applied to the amount paid out with the load instead.
This is going to have a significant effect on the profit margin of insurance companies, in fact, Ageas have confirmed to me today (28th February) that they are increased their rate by 9.3% with effect from the 20th March 2017.
Current Discounts – Current discounts in place with Insurers are here.