Aviva's 2016 results have revealed a combined operating ratio (COR) of 112.3% in UK commercial lines business.
The Insurer detailed that without the change in the discount rate - also known as the Ogden rate - it would have achieved a 96.2% figure.
This would still have been marginally above 2015 when it posted 95.8%.
What does this mean in practice
The effect of the recent ruling on the discount rate applied to insurance claims payout calculations means that insurers have to dramatically increase the value of the reserves that have been set aside to pay injury claims. The increases can amount to hundreds of millions of pounds per insurer and in the case of Aviva, they have changed their results from an anticipated small operating profit to a significant loss for the 2016 year.
What are the implications for policyholders
As all insurers who deal in casualty ( liability ) and motor insurance have had to dramatically increase the amount set aside for current and future claims, prices for these classes of insurance are set to increase accordingly. Private car policies have been the first to see increases with young and older drivers being hardest hit. Fleet policies and Liability policies are set to follow as insurers work out their sums.
Insurers are lobbying the government to overturn the ruling which they believe is based on flawed methodology and which will place an unfair burden on the consumer, but at the time of writing no concessions have been announced.
Amicus will be monitoring the situation closely, so watch this space for more information.
