Road accident victims injured again as Government caves in to insurers

The Ministry of Justice has backtracked on plans to increase awards available to people left seriously injured or disabled

Still think insurers are motivated by the interests of their insureds as they claim? (Getty)

I don’t know about a country that works for everyone, but the Conservative Government has certainly made sure it works for the insurance industry.

Having proposed to do something rather out of character by standing up for the interests of those seriously injured in road accidents, the Ministry of Justice has reverted to type.

Let me explain. Earlier this year the MoJ said it planned to tweak the Ogden rate – applied to compensation awards – in the favour of victims.

Their settlements used to be discounted by 2.5 per cent to reflect the returns available to them through investing their awards over their lifetimes.

However, noting that investment returns are currently abysmal while inflation is riding high, the MoJ decided (rightly) that it was time to revise the rate.

It proposed to change it to -0.75 per cent, which would have had the effect of increasing awards slightly.

Now, however, after having listened to a chorus of complaint from the insurance industry, it is proposing to change the rate to 0 per cent at best, and perhaps to discount awards by as much as 1 per cent.

Oh, and by the way, because the measure will have to go through a parliament that is currently grappling with the Brexit bill, it could be months before even that takes effect.

“This is a welcome reform proposal to deliver a personal injury discount rate that is fairer for claimants, customers and taxpayers alike,” crowed Huw Evans, director general of the Association of British Insurers.

“If implemented, it will help relieve some of the cost pressures on motor and liability insurance in a way that can only benefit customers.”

Hang on a minute, though. If those those cost pressures were so intense, how on earth was it that the industry’s stalwarts all announced bumper profits and dividends during the most recent results cycle?

Aviva, Royal & Sun Alliance, AXA, Direct Line, they all did very nicely, thank you very much, as motor insurance premiums soared to record highs.

There might be a reason for that, quite separate from the “cost pressures” cited by Mr Evans. It might be because (as I have written in the past) insurers aren’t as competitive with each other as they’d have you believe.

You can only put up premiums if you have pricing power, regardless of cost pressures. Insurers right now have that power. And the Government has just handed them another pressie! It’s good to be in control.

Still think insurers are motivated by the interests of their insureds as they claim? Perhaps you might like to consider figures provided by the Financial Ombudsman Service.

The most recent that are available cover April to June 2017 and they show that it dealt with 3,137 cases related to car and motor cycle insurance during that period, a sharp rise on the 2,550 during April to June 2016. It’s worth remembering, at this point, that the ombudsman only gets involved after a customer has exhausted a company’s in house complaints procedures.

I’m willing to bet that your car insurance premiums will barely be affected by the MoJ’s backtracking. But there will be celebrations in the boardrooms of insurance companies.

As for those people struggling to recover, or grappling with disabilities through the actions of bad drivers? They’ve just been hit again.