The Ogden rate is changing… 20th march 2017
As of the 20th march 2017 there will be a new Ogden rate.
What is the Ogden rate?
The Ogden rate is a discount rate that is applied by the court when receiving a lump sum of compensation on personal injury claims. The Ogden rate is an adjustment that is made to this lump sum to ensure that the compensation to be paid is fair and just for both parties. This rate takes into consideration the investment that may be made on receipt of a lump sum compensation payment and as a result applies the Ogden rate to adjust the amount to be paid to the injured party meaning that the payment if invested can earn more.
The Ogden rate had remained the same since 2001 at 2.5%, however upon review by the lord chancellor he decided that the rate needed to fall and it was set that the Ogden rate was to fall by 3.25 points to -0.75%. this has meant that the discount rate has caused an increase in the amount that should be paid out in compensation.
What does this mean to me?
Due to the increase in the amount that an insurer may have to pay out in personal injury they will begin to value the risks higher and in turn this will impact on the premium prices for insurance. To put it into context a claim for a 21 year-old , male, with a future in nursing care has been injured meaning he cannot work. Under the old rate of 2.5% the claim would have meant a compensation payment of approximately £9,000,000 however under the new rate of -0.75% the compensation due saws to £20,000,000.
As you can see the cost of personal injury has rocketed under the new rate and as a result the cost to insurers will increase. This will mean that even small risks will see an increase in premiums to cover the cost of these claims. This will mean that all types of insurance may see premiums rise, from motor insurance to medical malpractice insurance, most premiums will be increased.