UK Edition
Admiral urges Government to row back on 'extreme' payout reforms
The boss of insurer Admiral has urged the Government to row back on changes to the rate used to calculate personal injury claims, warning that the country's youngest drivers will be most affected by the "unnecessarily extreme" measures.
The Government is currently carrying out a consultation into the so-called discount rate, used to determine insurance payouts to those who have suffered life-changing injuries. Earlier this year it changed the calculation from 2.5pc to -0.75pc in a move that shocked the industry.
The decision is set to send premiums higher for car owners and cost the insurance industry millions.
Admiral chief David Stevens urged ministers to "move towards a halfway house between the old system in need of reform and the -0.75pc announced" to minimise damage to the market.
"That's particularly important because the impact on [the discount rate] Ogden is focused on younger drivers paying higher premiums," he said. "These drivers need a car sometimes to access education and to access work."
The insurer fell to the bottom of the FTSE 100 in early trade on Wednesday after disappointing analysts with its results for the first half of the year, with profits subdued in part because of the impact of the rate change.
Its shares plunged 7pc to £20.25 even though the company posted a slight rise in pre-tax profits of £193m in the six months to June 30, up from £190m last year.
Mr Stevens admitted the costs associated with the discount rate change - which had a major impact on its results last year, hitting profits by £105m - still had not gone away. "In these circumstances, we are happy to report a marginal increase in profitability," he said.
He added that claim costs for the UK motor insurance market would rise by just over 10pc if the rate stays at the "unnecessarily extreme" rate of -0.75pc, with insurers hopeful the Government will change its mind.
Concerns over how the rate might impact the insurer overshadowed a boost in its price comparison business, which swung to a profit in the first half, as well as narrowing losses in its international insurance arm.
However the Cardiff-based group suffered a major embarrassment earlier this year when the Financial Conduct Authority said the insurer may have given "inaccurate information in renewal documents" to some of its customers, breaking new rules aimed at encouraging customers to shop around for better deals.
Mr Stevens said those with household insurance in particular were less likely to shop around for a bargain. "The answer to that is to shop around on price comparison [websites]," he said. "People are moving more and more to that, which is addressing the problems that arise."
Like its rivals, Admiral is now waiting for the outcome of the Government's consultation into the discount rate change.
Huw Evans, the director-general of the Association of British Insurers and a former Downing Street special adviser, told The Telegraph last month that the discount rate reduction could do more damage to the insurance sector than all of the flooding in the North of England combined over the last decade. However he said he was hopeful new City minister Steve Barclay would push through change.