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Today's announcement that the discount rate for personal injury claims is to decrease to minus 0.75% is a devastating decision for our industry which is still dealing with a recent third rise in IPT and the ongoing influence of claims inflation. For a government that is pressing for a cut in motor rates, this is an incongruous move that will all but eliminate any benefits created by recent increases to the small claims track for whiplash, certainly in the short-medium term.

But moreover, it marks further bad news for millions of motorists who will now inevitably see further rises to already above-inflation premium increases. ERS, in line with the market, now has no option but to proceed with adjustments to its rates to counter the impact of this move.

The rate change will undoubtedly test the resolve of those motor insurers who are trading on minimal margin and with bare minimum capacity. With three exits in the last few months, we would not be surprised to see more insurer collapses following this announcement, making it more critical than ever for brokers to consider carriers with the guarantee of a strong credit rating.

Ian Parker, chief executive ERS said: "Even after today's announcement there remains massive uncertainty with a full framework review still to come shortly before Easter. In the meantime, claimant lawyers are unlikely to want to settle a large personal injury claim before the 20th March and there's little incentive for insurers to settle large claims until the consultation is complete. This uncertainty is going to make the UK motor market extremely volatile for the next period".

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