Ogden Report


When insurance makes the news one can normally assume it is bad news for a customer. However, the announcement by the Government that the Discount rate – also known as the Ogden rate – was to reduce from 2.5% to -0.75% – caused shockwaves throughout the industry as a whole.

The discount rate is, in simple terms, an interest rate someone might expect to earn on a lump sum over their natural life should they suffer life-changing injuries. The lump sum covers lost potential earnings and covers care and additional health costs. The amount payable by the insurance company was, however, reduced as a result of the Discount rate rules.

That this is now a negative rate means an increase in claims costs for the most serious incidents of millions of pounds per case for insurers on any policy that might involve personal injury. Naturally, insurers are going to pass this additional cost onto their customers.

The media has concentrated on private car insurance and the impact on premiums for the millions of individuals to be affected but businesses will be just as badly affected as Commercial Motor policies (Lorries, Vans, Agricultural for Fleets and Individual traders), Employers Liability, other Liabilities, Motor Trade and any other policy where a personal injury claim can be made will be impacted.

With Insurance Premium Tax (IPT) due to be double the rate of a couple of years ago come 1st June, SME businesses are facing pressures from the insurance industry like never before. Once uncertainties over Brexit and the economy are thrown into the mix one sympathises with the plight of businesses large and small.

M R Ratcliffe Consultants Ltd have been Commercial Insurance brokers for over 40 years specialising in the Transport industry.