by Zach Gray, of D E Ford

ON Monday, August 5, the ‘Ogden Discount Rate’ was adjusted from -0.75 per cent to -0.25 per cent.

The statutory rate was reset by the current Lord Chancellor David Gauke and forms part of the Criminal Damages Act 1996 and forms the basis for calculating personal injury claims.

In serious injury cases, claimants will usually receive their compensation as a lump sum and invest it. As such they can expect to receive a rate of return over the remainder of their lives. This is where the Ogden Discount Rate comes in.

Insurance companies are one of the organisations who are affected most significantly by changes to the rate, that said, they are not the only ones.

Whichever way we look at it, this rate is established to protect those who have been the victim of a serious injury – and let’s face it, that could be any one of us.

Making sure seriously injured parties receive the correct funding to allow them to look after themselves is a fundamental aim of the award and should be acknowledged as such.

The insurers role is to make decisions on premium setting based on levels of perceived risk and the entire industry is predicated on chance.

The change to the Ogden Discount Rate has meant that the odds are now stacked a little in the insurers favour (as payments should be slightly lower), however, many had predicted (and set their book rates) on a more positive move.

The impact is that we are preparing for premium increases, intensified by recent news of two insurers entering into administration and two others withdrawing from the market.

Insurance is a something we buy but hope we will never need – we all want value for money but it is important that the decisions we all make (choosing insurers and cover) are sensible in the context of a changing legal environment.

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