The Ogden tables are a set of statistics used by the insurance industry, to determine compensation and pay outs following an insurance claim.
On 27th Feb 2017 the Lord Chancellor, Liz Truss altered the Discount Rate, a factor of the Ogden table used to calculate the lump sum paid to victims of serious personal injuries.
Usually, the sum paid out to the claimant is expected to grow with interest rates, therefore continuing to pay for care and living costs over a number of months or even years after an injury. However, the low interest rates are leaving claimants short on money. Truss changed the Discount Rate to reflect this, by increasing the initial pay out received by the injured party from 2.5% to -0.75%. This means that, rather than any lump sum award being discounted to allow for a 2.5% investment return, the settlement will be increased, reflecting a decision that over the long term there is predicted to be a negative return on investment.To give an example, the award made to a 27 year old female with a serious life-changing injury will move from £6.5m under the old Discount Rate to approximately £14m under the new one.
This means that insurance companies now must prepare to pay out higher claim amounts, in order to prepare for this, they must increase premiums for policy holders. This has had a great effect on policies with high risks of personal injury including Employer Liability, Public Liability and Motor Insurance. The impact of the premium increases will depend on a range of factors, including the activities undertaken by clients, their claims history and their exposure to severe injury losses.
At Sagar we have the expertise in claims defensibility needed when serious injuries arise therefore hope that we can mitigate the increase in reserving and impact on premium increases. Our 30 years of experience and vast range of contacts in the industry means that we can provide support and guidance throughout any claims process, keeping you informed all the way.