Berkeley Alexander has given brokers a stark warning that general insurance rates will soon rise due to the Ministry of Justice cutting the Ogden Rate.
The Ogden rate is used by courts to determine how much insurance companies should pay out to customers who suffer from a life-changing injury.
Lord Chancellor Liz Truss (pictured) cut the rate from 2.5% to -0.75% on 27 February.
Geoff Hall, managing director of Berkeley Alexander, said: “We are already seeing insurers coming through our systems alerting us to rate increases.
“Claims costs will soar, making it inevitable that there will be an increase in employers & public liability premiums for businesses across the UK as well as impacting their costs on insuring their works vehicles.
“Rising premiums will be of concern to clients and it offers brokers who have business clients an opportunity to review their insurance needs, whether they be commercial risks or motor fleets.”
The Association of British Insurers has called the rate change “reckless in the extreme”.
The insurer LV= said that if a 25-year-old sustained a moderate brain injury and was awarded £100,000 a year for life, under the old system the total payout would be calculated as £3.1m but under the new discount rate the same person would be awarded approximately £8m.