The Association of British Insurers launched a legal challenge to a U.K. government decision to review the discount rate applied to personal injury compensation claims, the Financial Times reported Dec. 20.
The review will look at the discount rate applied to lump-sum payments for long-term injuries, which has remained at 2.5% since 2001 despite falls in long-term interest rates in recent years, the FT noted. Lord Chancellor Liz Truss will reveal the results of the review by the end of January 2017, according to the report.
The ABI said the discount rate should reflect returns that the recipient of a payment could generate, rather than a single standardized figure. It also warned that changing the discount rate could push up payments and in turn affect premiums for products including motor insurance, and it called for the government to conduct a full consultation before making any decision.
"Insurers are open to a proper dialogue on how to reform the system, but this is not the way to do it," said ABI Director-General Huw Evans.