Insurance: Admiral warns over price hikes

The group said it had already taken “pre-emptive” action to increase prices last December with “more to follow” as it looks to recoup a £150m hit following a cut to the so-called Ogden discount rate calculation.

It became the latest car insurer to reveal the impact of changes to the Ogden rate, with underlying pre-tax profits dropping by 25 per cent to £284.3m in 2016.

Admiral took most of the £150m estimated impact in the results, but said there would be around another £65m to be reflected in the coming years.

Shares in the insurance sector plunged last week after Lord Chancellor Liz Truss put forward changes to the discount rate calculation, which is expected to increase payments given to victims of life-changing injuries through medical negligence, car crashes and other incidents.

Ms Truss said, from March 20, the rate would be cut from 2.5 per cent to minus 0.75 per cent, but the Government is now consulting on the move.

David Stevens, group chief executive of Admiral, blasted it as an “eccentric government decision”.

Chairman Alastair Lyons added: “We strongly support the Association of British Insurer’s call for a fundamental review of the basis on which the Ogden rate is set in order to ensure that the relevant compensation awards are set appropriately and welcome the intent of the Lord Chancellor and the Chancellor of the Exchequer to implement this review expeditiously.”

The group said, despite the profit blow, it would hand out its annual shares windfall to staff with almost 9,000 employees each receiving free shares worth a total of £3,600.

Admiral, which also owns price comparison website Confused.com, said increases in the cost of cover should also mean profits are largely protected once the Ogden rate change comes into effect.

It has already pushed through car insurance price rises over 2016, which helped send total written premiums up 17 per cent to £1.86bn.

Average written car insurance premiums rose by around 4 per cent in 2016.

But the group said prices leapt 14 per cent higher across the wider market, according to its Confused.com/Willis Towers Watson Car Insurance Price Index.

Its Confused.com business swung out of the red on an underlying basis, with profits of £3m against losses of £7m in 2015.

On a bottom line basis, Confused.com narrowed losses to £3m from £16m in 2015.