Direct Line says insurance payout change has cost it £217m
- 7 March 2017
- From the section Business
Insurance company Direct Line has said last week’s changes to the way accident victims are compensated has dented pre-tax profits by £217m.
The Ministry of Justice announced a new formula for calculating compensation payments for those who suffer long-term injuries, which means insurers will have to increase payouts.
As a result, Direct Line said profits for 2016 had fallen 30% to £353m.
However, it said it had seen strong growth in home and car insurance.
The company also said it did not expect this year’s results to be affected by the change in compensation calculations.
When the change to the payout formula was announced last week, a number of insurance companies said their profits would be hit.
The Ministry of Justice said it was reducing what is known as the discount rate from 2.5% to minus 0.75%.
The move will result in more money for the victims of accidents, and so increase costs for insurance companies.
This post was written by FSB News