The Ogden discount rate is a calculation used to determine how much money insurance companies should pay as compensation to people who have suffered life-changing injuries so that it will cover all their predicted future costs. In 2017, the rate was changed from 2.5% down to -0.75%, which effectively meant the payout to claimants would have been much higher than the same settlement amount at the previous rate. Naturally, this had a big impact on the insurance industry and many insurers increased policy premiums to counter for this change, however, it has already had a significant impact on the insurance industry and profits of some insurers.
Since this initial change there has been significant lobbying by insurers and today it was announced the government will change the previous rate set in 2017 of -0.75% down to -0.25% with effect from 5thAugust 2019. So, although this change will reduce the amount insurers have to pay out it was not as much as that was expected from within the industry. A quote from Huw Evans, Director General of the Association British Insurers stated :
“This is a bad outcome for insurance customers and taxpayers that will add costs rather than save customers money. A negative rate maintains the fiction that a claimant and their representatives will knowingly choose to invest their damages in a way that would guarantee losing them money. This will remain the lowest discount rate in the Western world, leaving England and Wales an international outlier at a time when we need to boost our attraction to international capital.”
If you would like to talk further about the recent change please do not hesitate to get in contact with your local Aston Lark Account Executive.