Changes to Personal Injury compensation rates
The government has recently made a ruling which could have an impact on a large number of commercial and personal insurance premiums. The announcement saw a change in the Personal Injury Discount Rate, sometimes known as the Ogden rate this has been reduced from 2.5% to -0.75% with effect from March 2017.
The discount rate has been traditionally applied to lump-sum payments made by insurance companies to claimants following injuries sustained in motor accidents, accidents suffered at work or on another’s premises. The thinking behind this is that the claimant is receiving a large lump sum payment which they could invest to receive future investment earnings. There is a concern that this leads to victims being overcompensated.
Because investment returns in recent years have been low, the reduction in the discount rate reflects the fact that claimants will receive less on their invested lump sum. As the rate has changed to a negative figure insurers will have to top-up their settlements.
As it stands, it’s unclear exactly how much the cost of some insurance might be affected by this change. The Chancellor of the Exchequer Philip Hammond will be meeting with representatives of the insurance industry to assess the impact of the rate change and there will be a consultation before Easter to consider options for reform.
If you would like to talk to us in more detail about how these changes might affect you and your insurances then please contact us today. Here are two documents which give a more detail, click on each to download.