LONDON, Feb 27 (Reuters) - Britain on Monday changed the rate at which compensation payments are calculated in personal injury claims, a move likely to increase the size of lump sum pay outs and potentially hit UK motor insurers’ profits.
The Ministry of Justice cut the discount rate used to calculate lump sum payouts to minus 0.75 percent from 2.5 percent, it said in a statement, a rate that had been in place since 2001.
A downwards move in the discount rate is expected to force insurers to pay out more in cash to personal injury claimants now to ensure that returns over their lifetime met the awarded compensation.
“The current legal framework makes clear that claimants must be treated as risk-averse investors, reflecting the fact that they may be financially dependent on this lump sum, often for long periods or the duration of their life,” the Ministry of Justice said.
Admiral said on Monday it was postponing the publication of its annual results as a result of the change, to March 8 from March 1.
It estimated the net financial impact on 2016 reported profit at 70-100 million pounds ($86.96-124.23 million).
Direct Line last week postponed the release of its annual results until after the results of the review.
It said in a statement on Monday it would update the market later in the day on the implications of the change. ($1 = 0.8050 pounds) (Reporting by Carolyn Cohn; Editing by Rachel Armstrong)