Government Announces Change to Personal Injury Discount Rate
When victims of life-changing injuries accept a lump sum compensation payment, the actual amount they receive is adjusted according to the interest they can expect to earn by investing it.
In addition, when finalising this amount, the Courts apply a Personal Injury Rate, also known as ‘Ogden’ or ‘Discount’ rate, designed to help calculate future losses for life (such as care costs) and future loss of earnings. The rate is applied using multipliers specific to each claimant taking into account their age and other factors such as their education, retirement age and life expectancy.
Last month the Lord Chancellor announced that commencing 20th March 2017, changes to these personal injury compensation payments, adjusting the rate from 2.5% to -0.75%. This rate change will dramatically increase the amount paid out for personal injury cases. As an example, we are aware that an insurer has recently increased an outstanding reserve from £750,000 to £1,250,000 for a 43 year old claimant at the new discount rate.
The current rate of 2.5% has remained unchanged since 2001, therefore, the new proposed rate has been amended to reflect the current financial market and the likely return on investment. As I’m sure you have seen in the news and media, such a change has a massive impact on motor and liability premiums. Whilst information is still coming through, one major private motor insurer has advised that premiums will be increasing by 9.3%.
Please rest assured that many of the industry representatives including BIBA and the Association of British Insurers (ABI) are lobbying hard to reduce the significant impact on the discount rate. Pavey Group are members of BIBA and will continue to work with the association and our insurer partners to understand the impact on premiums going forward.
We will continue to work with our Insurer partners and search the markets available to us to ensure that we provide you with the most competitive solution to meet the requirements of you and your business.
However, if you have any immediate concerns or wish to discuss your policy with a member of our team, please do not hesitate to contact us on:
|Exeter: 01392 880000||Torquay: 01803 652000||Holsworthy: 0333 2026502|