12 June 2017Insurance

UK government urged to work on insurance issues despite Brexit

The UK government needs to continue working on insurance issues such as whiplash reforms and the discount rate review despite the distraction caused by Brexit negotiations, law firm Clyde & Co has warned.

“A series of major reforms to legislation affecting claims awards have been set in motion, including around whiplash, driverless cars and the Ogden discount rate, but now questions must be asked about the government’s will – and, indeed, ability – to see them through,” said Mark Hemsted, partner of Clyde & Co.

The recent June 8 parliamentary general election saw the UK’s Conservative Party lose its majority and prompted the departure of Liz Truss from the Ministry of Justice. Truss was replaced with David Lidington.

“We are hopeful that the new Justice Secretary will keep these reviews firmly front of mind,” Hemsted said.

The UK government has proposed to cap compensation for whiplash injuries which could lead to lower motor insurance premiums.

In February, the UK’s Lord Chancellor decided to change the Ogden discount rate to -0.75 percent from 2.5 percent. The move forced re/insurers to significantly increase their reserves, impacting profitability.

The British Insurance Brokers' Association (BIBA) and the International Underwriting Association of London (IUA) have set out their plans for the UK’s Ogden personal injury discount rate reform in response to a government consultation.

“While the whiplash reforms were better received by the industry than the results of the discount rate review, both were subject to further consultation. The industry certainly had high hopes of softening the impact the discount rate changes, but these may be lessened by the simple fact that this new government is going to be distracted by Brexit and the machinations of Westminster. We urge the government to return to these important issues as a matter of urgency,” Hemsted said.

“In addition, the UK has, with government support, been able to establish itself as a leader in the development of autonomous technologies for motor vehicles and other forms of transport. It would be disappointing if that lead was now eroded by political indecision and a decline in business confidence,” Hemsted added.

“In our view, if the UK is to make a success of Brexit, the government cannot afford to detach from business and fail to deliver the leadership and the legislation on which industries depend.”

“In insurance in particular, the UK is a world leader, but global competition is snapping at our heels so we have no time to waste.”

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More on this story

23 November 2016   As the UK government proposes to cap compensation for whiplash injuries, motor insurance premiums are likely to fall, according to Fitch Ratings.
27 February 2017   The UK insurance industry has expressed its concern over the Lord Chancellor’s decision to change the Ogden discount rate to -0.75 percent from 2.5 percent.