Concerns on potential increases in Insurance premiums

The RHA is concerned that hauliers and businesses in NI may be in for a surprise when the time comes to renew their insurance premiums in the future. The Department for Justice in the NI Executive has proposed changes to the way that compensation pay outs are calculated within the region. 

The discount (or interest) rate used to calculate these pay-outs will be cut from 2.5% to -1.75%, The rate used to calculate pay-outs in GB has already been brought into law with the Scottish Government setting a rate of -1.25% and England setting a rate of -.75%. 

Whilst we appreciate the system needs overhauled and updated, we are very concerned that the formula used to set the levels of compensation, the Ogden rate, should reflect similar changes introduced in GB. This would ensure that compensation remains fair and reflects prevailing economic conditions and does not add additional costs for businesses in excess of those experienced in GB. 

The reality is that this will result in businesses in NI facing higher insurance premiums and costs than their counterparts in GB. 

The following table illustrates the potential impact on selected discount rates will have on compensation payments. 

Whilst there are no figures to illustrate the increase in premiums it Is anticipated they will increase considerably.

We have been contacted by the Association of British Insurers (ABI) who have highlighted the implications of the proposed changes for Businesses and Public Bodies in NI in the context of the potential for significant increase in insurance premiums or compensation pay-outs. This will add to the financial pressures already being experienced by NI businesses due to the Covid pandemic and Brexit. 

The Department for Justice in the NI Executive has called for evidence on draft legislation – the Damages (Return on Investment) (Northern Ireland) Bill accessible via http://www.niassembly.gov.uk/assembly-business/committees/2017-2022/justice/primary-legislation/damages-return-on-investment-bill/call-for-evidence/with a deadline of 30thApril 21 for response. 

The ABI have produced a briefing note for MLAs on the Personal Injury Discount Rate, the need to reform it under the Damages Bill and the consequences for consumers. 

The Department of Justice consulted on reforming the methodology for calculating the Discount Rate last summer – you can read the consultation at https://www.justice-ni.gov.uk/consultations/consultation-personal-injury-discount-rate-how-should-it-be-set.

The Department of Justice has released a number news release on its intention to change the Discount Rate to minus 1.75% https://www.justice-ni.gov.uk/news/personal-injury-discount-rate-set-change.  The Irish Legal news covered the Department’s announcement which included a comment from the ABI:“We are surprised and disappointed in this decision, which will mean that Northern Ireland has the lowest Discount Rate in the world. The Department of Justice is persisting with an outdated and flawed methodology to calculate the Personal Injury Discount Rate, when the priority should be continuing its efforts and endeavouring to set a modern fit-for-purpose Discount Rate system for Northern Ireland.”

The outdated method for calculating compensation payments in NI has been challenged through a judicial review and was conceded by the Department of Justice with the local press including the Belfast Telegraph and the Irish News both covering the story.  They set out the consequences for claimants in personal injury cases, however they ignored the potential implications on insurance premiums and for compensators.