UK insurers have welcomed proposed changes to the system for calculating serious personal injury compensation payouts, and have committed to pass on cost benefits to customers.

The Association of British Insurers says the reform bill released last week will deliver a framework fair for customers, claimants and taxpayers.

“It is now important that Parliament agrees these proposals swiftly so people across England and Wales can start to see the benefits,” association Director-General Huw Evans said.

Low-risk investments, rather than very low risk, are to provide the basis for the interest rate used in compensation calculations.

And the rate will be reviewed at least every three years to limit the impact of future shifts.

A year ago the Government sharply cut the “Ogden rate” to negative 0.75% from 2.5%, causing an earnings hit for insurers that must set aside reserves to cover claims.

The bill also clamps down on exaggerated or fraudulent whiplash claims, setting fixed amounts of compensation and banning the practice of seeking or offering to settle without medical evidence.

“The number of whiplash claims has been too high for too long, and is symptomatic of a wider compensation culture,” Justice Secretary David Gauke said.

“We are putting this right through this important legislation, ensuring whiplash claims are no longer an easy payday and that money can be put back in the pockets of millions of law-abiding motorists.”