There is nothing like the sound of the insurance industry in full, self-righteous outrage mode – and last week we had a classic.
The decision by Lord Chancellor Elizabeth "Liz" Truss to cut the discount rate for compensation awards on serious injuries to -0.75 per cent from 2.5 per cent was branded “crazy” by the ABI.
Loathe as I am to agree with the ABI, I suspect it has a point.
Even with the excessive fees extracted by the fund management industry it is quite difficult to make a negative post-inflation return on investments over the long term – though some in the insurance industry have achieved this feat.
The difficulty is that they can look in danger of crying wolf.
According to them, higher insurance premiums are always someone else’s fault – whether it be the government raising tax, claims-handling lawyers encouraging whiplash claims, crooks indulging in crash-for-cash or customers seeking compensation.
The difficulty is that they can look in danger of crying wolfThey conveniently overlook their own role in handing on customers’ names to car hire and accident management firms.
Some of the numbers being bandied about are intriguing to say the least.
Accountants at PricewaterhouseCoopers (of the Oscars fiasco) suggested premiums for younger drivers could rise by up to £1,000. There were 3.2m 17 to 24-year-olds on the road according to an April 2014 study by the Department for Transport.
Let us say half of them pay half the £1,000 maximum – that would come to £800m.
Meanwhile, PwC cautions that premiums for the over-65s could rise by up to £300.
A fifth of drivers in the UK (just under 7.2m) are aged over 65 so that would be an extra £2.16bn charged if they all pay the maximum £300 extra.
Perhaps PwC did its calculations on the back of the wrong envelope because the overall impact on the motor insurance industry was estimated at about £3bn. Based on the ABI figures of 36m motorists, that should be about £83 per head.
So either most people will pay nothing, very little more or even get a discount, or those headline figures were just put out to scare us.
The crux of the problem is that the discount rate is based on index-linked gilt yields – which are possibly one of the last investments anyone receiving a lump sum would choose.
The insurance industry started the discounting, but it now seems to have come back and bitten it on the bottom.
Chancellor Philip Hammond has said he will review the rate, so rather than just squawking about the injustice of it all, the insurance industry should now come up with positive proposals for how compensation payments could be treated going forward.
Probate fee woes
The proposed change in probate fees starting in May feels like yet another attack on the thrifty middle classes.
Dressed up as a more equitable system, this is really a stealth rise in inheritance tax.
Unless the government can be persuaded to back down then fees will rise from the current £215 to £8,000 on estates of more than £1m and £20,000 on estates of more than £2m.
Given that fees will rise on all estates of more than £50,000, it effectively means that nearly every homeowner will have more money taken from their estate.
The £256m extra it is expected to raise is a tiny sum in terms of overall government revenue, but it will have a disproportionately painful effect on bereaved families.
Probate is supposed to be a fee for a small job done – not a peevish tax imposed on the dead and those they leave behind.
Debit card frustration
I have just returned from a wonderful holiday in Sri Lanka. On arrival at Colombo airport I withdrew cash using an ATM – and stupidly left my Nationwide card in the machine.
I realised my mistake a couple of minutes later, but the card had gone, so I called from the mobile phone number registered on my account.
I provided my name, address, date of birth and account number.
I was then, bizarrely, asked about my overdraft limit. I explained I had no idea because I do not go overdrawn.
“Name some recent transactions.” I had just been travelling for 16 hours; my mind went blank.
“Name some other accounts”. This I could do, though I may have got them slightly wrong because most are a little bit silly – that is, Flexclusive this and that.
I was then told I had failed security checks and Nationwide would not send a new card to my home address where I have lived for the past 19 years.
I hung up in a state of total confusion, frustration and extreme irritation.
Tony Hazell writes for the Daily Mail's Money Mail section
