Firstly, “what is the Ogden rate?”.
Put simply, when a personal injury claim occurs a lump sum is paid as compensation for life changing injuries. The amount awarded to the claimant is adjusted to compensate for the amount of interest they can expect to earn by investing it to ensure that they are never under or over compensated. The amount by which this is adjusted is known as the Discount Rate, but is often referred to as the “Ogden rate”.
Secondly, “what are the costs?”.
Until recently the Ogden rate had been set at 2.5%, meaning that for every £1,000 in compensation, the insurer will pay out £975. The claimant would then be expected to earn 2.5% interest a year, earning them the full payment they are due.
As of the 20th March 2017 the MOJ (Ministry of Justice) cut the Ogden rate from 2.5% to -0.75%, this now means for every £1,000 paid in compensation the claimant can now expect to receive £1007.50. A staggering £35 increase – this is not only for new Personal Injury claims, but for claims that are still ongoing as of the 20th March 2017.
At this stage insurers are still grappling with what the true costs are coming too.
Thirdly, “how does this effect me?”
As stated previously, insurers are still hitting those calculators and drinking plenty of coffee desperately trying to work out the true cost implications. However, we have seen in the last 4 weeks a rise in haulage motor costs (premiums) and will no doubt see even more rises. At this point it is crucial for haulier’s to look around at renewal, find a specialist broker that has built trusted relationships with insurers in the market. No doubt, some of you have already felt the impact of the change in Ogden rate on your insurance premium, but if you haven’t and are reading this before renewal… Please take our advise and find a haulage specialist broker that really knows their insurers and markets to find you the most competitive price.