In the UK, where private insurers must meet most claims for accidents, the discount rate applied to settlements for lifetime loss of income has been a major problem for the last couple of years. The formula for the discount rate never envisaged the market conditions that followed the global financial crisis of 2008. The consequence of that was a negative discount rate: -0.75% applying to future income losses. This saw the capital cost for settlements balloon. So British Insurers are cheered by the review of the discount rate currently underway.
"We welcome today’s announcement. Insurers remain committed to paying 100% compensation and want to see a process for setting the Discount Rate that delivers a fair outcome for claimants, motorists and taxpayers. The outcome of the review must deliver this, and we will continue to play our part to ensure that it does." says James Dalton, Director, General Insurance Policy, Association of British Insurers of a recent announcement made to the London Stock Exchange. Click here to read more.