EARLIER this year it was announced by the Lord Chancellor that the Ogden discount rate will be reduced from 2.5 per cent to -0.75 per cent in England and Wales, thus setting a new rate applicable under the Damages Act 1996.
So, what is the Ogden discount rate and how does this affect you? BHIB Head of Claims, Tim Pearson explains:
“The rate forms part of the consideration when making lump sum payments to a severely injured person. It is used to ensure injured claimants are receiving the necessary financial security to provide for their care and loss of earnings. The discount rate is used to calculate the amount of compensation they will receive and reflects the return they will earn when that money is invested.
Previously, the rate stood at 2.5 per cent. From 20 March 2017, however, it reduced to -0.75 per cent.
“The change in rate will significantly increase settlement payments made by insurers following personal injury compensation payments.
“These changes will affect claims costs across all those lines of business which could be affected by claims for bodily injury, such as private and commercial motor, motor fleet, and liabilities. It is, therefore, to be expected that insurers will give immediate consideration to their pricing structures for those classes of business that will be affected, which is likely to lead to increased rates.
“This announcement is extremely disappointing for us as brokers, as it will be for our insurer partners and, of course, for customers.
“The previous rate of 2.5 per cent in England and Wales meant that we were already providing significantly greater compensation payments to those seriously injured than anywhere else in Europe.
“The further consultation could mean that this rate is only in place for a short time, but, as an industry, we must ensure that this ruling is contested and that at the earliest opportunity the rate is re-adjusted.”
To discuss the impact of this ruling or any other aspects of your insurance, contact BHIB on 0330 024 06 06, email or follow BHIB at twitter.com/bhibinsurance