Hastings takes £20m hit from ‘silly’ shake-up in car cover

Motor insurer Hastings shrugged off a £20 million hit to profits because of the Government’s shake-up to car insurance payouts.

The group slashed adjusted operating profit to £132.1 million from £152.1 million for 2016 after the Government decided to raise the injury payout rate but chief executive Gary Hoffman said the group had taken it “in its stride”.

“We were surprised by it. It was at the extreme end of our assumptions.

“Claimants that have a serious injury should get a very large payment but the assumption being set is that they put the cash under the bed and let it be eroded by inflation, that is probably wrong. It is a bit silly and the immediate impact will be to increase premiums,” he said.

Hastings batted away the hit by raising customer targets by 500,000 to three million and reporting a 9.9p dividend.

Justice Secretary Liz Truss changed the formula for the personal injury rate, known as the Ogden rate, for the first time in 16 years to minus 0.75 from 2.5% on Monday, meaning insurers will have to pay more. The Association of British Insurers described the decision as “crazy”.

Shares rose nearly 2% to 237p.