Admiral warns over price hikes

Car insurer Admiral has warned of price rises as annual profits tumbled by a quarter after the UK government’s “eccentric” decision to change the way personal injury claims are calculated.

The group said it had already taken “pre-emptive” action to increase prices last December with “more to follow” as it looks to recoup a £150 million hit following a cut to the so-called Ogden discount rate calculation.

It became the latest car insurer to reveal the impact of changes to the Ogden rate, with underlying pre-tax profits dropping by 25 per cent to £284.3m in 2016.

The Cardiff firm took most of the £150m estimated impact in the results, but said there would be around another £65m to be reflected in the coming years.

Shares in the insurance sector plunged last week after Lord Chancellor Liz Truss put forward changes to the discount rate calculation, which is expected to increase payments given to victims of life-changing injuries through medical negligence, car crashes and other incidents.

Truss said that, from 20 March, the rate would be cut from 2.5 per cent to minus 0.75 per cent, but the government is now consulting on the move.

David Stevens, group chief executive of Admiral, blasted it as an “eccentric government decision”. Chairman Alastair Lyons added: “We strongly support the Association of British Insurers’ call for a fundamental review of the basis on which the Ogden rate is set in order to ensure that the relevant compensation awards are set appropriately and welcome the intent of the Lord Chancellor and the Chancellor of the Exchequer to implement this review expeditiously.”