ARAG criticises ABI for UK Ogden discount rate decision handling

Germany-based legal expenses insurance provider ARAG has criticized the Association of British Insurers (ABI) for the way it responded to the UK’s personal injury discount (Ogden) rate decision.

The ABI message on the discount rate cut shows the industry in a poor light, ARAG said.

The Ministry of Justice announced on Feb. 27 that the Ogden discount rate used to calculate the compensation in large motor and liability bodily injury claims would be cut to -0.75 percent from 2.5 percent, effective from March 20. The move is supposed to reflect the lower real risk-free returns available on the UK index-linked government securities.

Huw Evans, ABI director general called the decision to cut the discount rate to -0.75 percent from 2.5 percent “crazy” as it will make claims costs soar, making it inevitable that there will be an increase in motor and liability premiums for millions of drivers and businesses across the UK.

ARAG plc managing director Tony Buss, said: “Many of the statements put out by insurers were careful to acknowledge that accident victims should be appropriately compensated, but the ABI’s focus on the “crazy” decision and the hike in premiums that would result, showed no apparent compassion and little acknowledgement of the seriously injured victims whose futures would be made marginally easier by the reform.”

“If its lobbying appeared to have failed this time, the ABI PR team seemed to play a blinder, dominating comment in news stories, framing the argument and even, to some extent, dictating the language.

“But any sympathy or even recognition that the reform had been made to help those whose lives have been transformed by misfortune, was hard to find,” he noted.

ARAG Group is a family-owned insurer employing 3,700 people around the world and generating premium income in excess of €1.65 billion. The group operates in the UK since 2006 providing a comprehensive suite of ‘before-the-event’ and ‘after-the-event’ legal insurance products and assistance solutions to protect both businesses and individuals.

“The clamour to decry a decision that was made solely to make justice that little bit more just does not reflect well on our profession," Buss said.

“Time and again, key industry figures have spoken about a public perception of our industry, that sees profit coming before people, sales before service and claims to be declined wherever possible: All “Corporate” but not much “Social Responsibility”.

“We know this is an easy falsehood that belies a far more complex truth, but such perceptions are harder to dispel when the industry is seen to fight so aggressively against the interests of those it claims to serve,” Buss said.

“The people who will benefit from the discount rate reform are among the most vulnerable in our society. Children injured at birth and motorists left paralysed after an accident should now have the money to fund their care adequately, as they age.

“By declaring the discount rate reform “crazy” because it will cost motorists an extra £75, the ABI has done nothing to improve public perceptions of insurers and left the impression of an industry that may be shallow, self-interested and heartless,” Buss explained.