UK insurers have attacked as "crazy" Government plans to change the way personal injury compensation pay-outs are calculated, a move that will wipe millions off the profits of the country’s largest insurance companies.

The Ministry of Justice announced this morning that it will cut the discount rate – a calculation used to determine lump sum compensation to claimants who have suffered life-changing injuries - to -0.75pc from 2.5pc.

The news came as a shock to the industry, which had widely expected the rate to fall to between 1.5pc and 1pc.

It will take effect from March 20, marking the first time it has been changed since 2001. The move will cost the insurance industry millions of pounds and send premiums higher for customers. The announcement caused shares across the sector to plummet by as much as 7pc.