The UK will introduce a new system for calculating serious personal injury compensation payouts, less than a year after changing the formula amid much criticism from the industry.

The so-called Ogden rate for estimating payouts will be about 0-1% under the policy change, up from minus 0.75%. A lower rate means a higher payout.

“We want to introduce a new framework based on how claimants actually invest, as well as making sure the rate is reviewed fairly and regularly,” Justice Secretary David Lidington said.

“In developing our proposals, we have listened carefully to the views of others, and we will continue to engage as we move forward.”

The Ogden rate will be set by reference to “low risk” rather than “very low risk” investments, as at present.

UK insurers have welcomed the policy reversal, which is expected to ease pressure on motor and liability policyholders.

“This is a welcome reform proposal to deliver a personal injury discount rate that is fairer for claimants, customers and taxpayers alike,” Association of British Insurers Director-General Huw Evans said.

“The reforms would see the discount rate better reflect how claimants actually invest their compensation in reality, and will provide a sound basis for setting the rate in the future.”

The British Insurance Brokers’ Association (BIBA) has expressed similar sentiments.

“This proposal reflects our call for the process to reflect the way compensation monies are actually invested,” Executive Director Graeme Trudgill said.

“BIBA now calls for a speedy timeframe for implementation of these proposals, to end the uncertainty for customers brought about by the significant underinsurance risk and increase to premiums that February’s discount rate change caused.”