Discount rate revamp? City minister Stephen Barclay is "concerned" about the "outdated" mechanism

Oliver Gill
Follow Oliver
City minister Stephen Barclay was speaking at the Association of British Insurers "Brexit – the road ahead" conference

The government has made its strongest hint yet of plans to overhaul the discount rate, amending changes that have cost the insurance sector billions of pounds.

Speaking at the Association of British Insurers (ABI) conference on Brexit, new City minister Stephen Barclay said the change in the discount rate “concerns” him.

The discount rate, a statutory percentage against which personal injury payouts are calculated, was controversially reduced from 2.5 per cent to minus 0.75 per cent in February. Industry watchers have predicted the change will cost the insurers and other organisations such as the NHS many billions of pounds.

Read more: RSA's Hester: Ministers must commit to solving £6bn discount rate debacle

Barclay said the government wanted to make sure the rate “is put on the firmest possible footing” to ensure “a claimant is paid no less than they should be, and no more”.

He added:

We have been consulting on moving away from a mechanism that has grown outdated and, with negative returns on interest-linked gilts, lost its connection with the way people invest in the real world.

In the days that followed the discount rate amendment, chancellor Philip Hammond said he was “personally committed” to finding a solution.

Read more: LV reveals £139m discount rate hit to annual profits

However, amending the discount rate was not specifically referenced in last week’s Queen’s Speech, leading to concerns that an overhaul had been kicked into the long grass.

Barclay said:

Like all MPs I am concerned about my constituents having access to good insurance at the right price.

Related articles