The recent announcement from the government to reduce the Ogden discount rate and the implications to both consumers and businesses in the UK.
March 7, 2017
The government has announced a change to reduce the Ogden discount rate, which is used to calculate compensation awards for serious personal injury and fatal accident claims. This is to ensure inflation does not erode the future value of a payout and will take effect from 20 March 2017.
The change will have a substantial impact on claims, affecting both consumers and businesses, with increases in claims costs for Commercial insurances such as motor fleet, employers and public liability cases:
- Motor insurance – 36 million motor insurance policies, covering both domestic and commercial vehicles will be affected, resulting in a substantial increase to the average motor insurance premium.
- Business – A personal injury claim could increase by 127% and the NHS will see an annual hike of £1 billion through clinical negligence costs.
How is an injury claim assessed?
The system used, known as The Ogden Discount Rate is designed to make sure a severely injured person has 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 receive to reflect the return they will earn when that money is invested.
What will this mean?
Consider the following example:
If John, who is 30 and earning £25,000 a year suffered an injury and was unable to work again, he would receive a pay out of £1.8m under the old rating. Under the new system this would increase by 127% to £3.5m.
What can you do?
Feedback from insurers is that an increase in claims will need to be met by significantly increased premiums. Now is the time to reduce the likelihood of a claim and improve your risk. Not only is this good business practice, your company will be more attractive to insurers to achieve a better premium. We will be doing all we can to help our clients:
Risk management – regardless of the business you are in, it makes sense to have a robust risk management plan. We can help you with this – get in touch now.
Fleet – Statistics show that there are nearly 200,000 casualties on the road each year. If you have a fleet of vehicles we have a suite of risk management solutions that can reduce your ‘at fault’ accident rates. Contact us for more advice.
Industry expertise – we specialise in construction, manufacturing, waste, rail and food & drink. Each of these industries face their own personal injury risks and we can help you reduce claims. For example, find out how you can avoid Health & Safety Fines.