Direct line has said that it will delay the release of its 2016 financial results as it awaits the UK government’s decision on the personal injury discount rate.
The FTSE 100-listed insurance company was due to publish its 2016 report on 28 February but has decided to wait until 7 March instead as the any alteration in the rate could impact its results. However, the company has also revealed that its sensitivity to any change in the discount rate is less than it previously suggested, as its personal injury claims liabilities related to lump sum settlements have currently been calculated using a discount rate of 1.5%. Currently, the discount rate is set at 2.5%.
Consequently, Direct Line said that it expects any adjustment to the discount rate to hit the “lower end” of its 93% to 95% combined operating ratio target.
At the end of January, the Ministry of Justice delayed its decision on whether the discount rate would be lowered. Elizabeth Truss, the Lord Chancellor, has said she will make a decision before the end of February.
A threat of legal action from the Association of Personal Injury Lawyers (APIL) last year forced a review of the discount rate for personal injury claims by the Lord Chancellor.
APIL took the unusual step of starting legal action amid ongoing concerns that seriously injured people have been undercompensated for years.
“People with lifelong injuries are continuing to be undercompensated, in some cases, by hundreds of thousands of pounds, because successive Governments have dragged their heels and failed to review the discount rate to reflect changes in the economy,” said Neil Sugarman, president of APIL.