UK government to launch consultation on Ogden personal injury rates
The UK’s Chancellor Philip Hammond has agreed to a consultation on the framework for setting future personal injury (Ogden) rates after a severe rate reduction alarmed the industry.
“The government will progress urgently with a consultation on the framework for setting future rates, and bring forward any necessary legislation at an early stage,” Hammond said in a joint statement with the director general of the Association of British Insurers, Huw Evans.
The statement followed a meeting that included other industry leaders.
“The industry will contribute fully to the upcoming consultation, and the government will carefully consider all evidence and arguments submitted,” it said in the statement.
The consultation comes after a severe reduction of the Ogden rate which is set to force the sector to increase reserves and premiums.
The UK’s Lord Chancellor and Justice Secretary Elizabeth Truss has decided on February 27 to change the Ogden discount rate to -0.75 percent from 2.5 percent. The so-called Ogden tables are used to calculate compensation awards for serious personal injuries. The change exceeded the level expected by the industry. Motor insurers and reinsurers are expected to bear the brunt of the impact.
According to analysis by Willis Towers Watson, a broker, the Ogden rate change will cost the insurance industry, in particular the reinsurers of this market, a material one-off reserve charge of approximately £5.8 billion. In addition, there would be a roughly £850 million per annum increase in the cost of providing motor insurance in the future.
Evans had previously called the discount rate cut “crazy” as it will make claims costs soar, making it inevitable that there will be an increase in motor and liability premiums for millions of drivers and businesses across the UK.
In the joint statement, Hammond and Evans said that “claimants must get the money they’re entitled to following an injury in order to support their future needs.”
“It is important that going forward, personal injury discount rates are set at a level that is fair to both claimants and consumers.
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