Outrage within the insurance industry over a looming increase in personal injury payouts has resulted in the promise of a Government consultation and new law, if needed.
In a surprise announcement on Monday, the Justice Secretary and Lord Chancellor Liz Truss confirmed the formula used to calculate compensation would be adjusted from 20 March as she had no alternative choice in law.
The change to the so-called discount rate, insurers said, would cost the industry billions of pounds – money that would have to be recovered through higher premiums.
The industry warned it could mean pricing young motorists off the road, with total average premiums rising by up to £75.
The Government did not dispute claims the NHS faced a potential £1bn extra annual cost burden in settling medical negligence cases as a result of the move.
Having to find such money would not be a priority spend the Chancellor would wish for as he also faces pressure to row back on business rate reforms in his first Budget next week.
It emerged on Tuesday evening that Philip Hammond had met the head of the Association of British Insurers, Huw Evans, and the bosses of 15 major insurers to discuss the impact.
Mr Hammond and Mr Evans later released a joint statement, which said: “Claimants must get the money they’re entitled to following an injury in order to support their future needs.
“It is important that going forward, personal injury discount rates are set at a level that is fair to both claimants and consumers.
“The Government will progress urgently with a consultation on the framework for setting future rates, and bring forward any necessary legislation at an early stage.
“The industry will contribute fully to the upcoming consultation, and the Government will carefully consider all evidence and arguments submitted.”
The share prices of many top insurance firms took a hit on Monday when news of the discount rate change emerged.
Aviva said the impact would result in a £385m hit to its profits alone.
Representatives of victims said the issue had highlighted a further social care issue for the country, arguing that particularly those with serious conditions had been left struggling through higher costs, forcing them to rely more on state services.