ABI: -0.25% Ogden rate change assessment ‘misleading and disingenuous’
A government Impact Assessment (IA) of changes to the UK’s personal injury discount rate, also known as the Ogden rate, has been described as “misleading and wholly disingenuous” by the Association of British Insurers (ABI).
In a letter to Lord Chancellor David Gauke, who announced the rate change from minus 0.75 percent to minus 0.25 percent, ABI raised strong objections to the IA issued to parliament this week.
“The IA completely misrepresented insurance market pricing and reserving in response to the setting of the previous [Ogden discount] minus 0.75 percent rate and omits to mention ministerial decisions since 2017 designed to ensure that the minus 0.75 percent rate was not widely adopted. I am very surprised indeed you chose to sign such a flawed document,” wrote Huw Evans, director general at ABI.
The letter argued that the UK government took steps to guide insurers and lawyers to assume a rate of between zero and 1 percent and to start to use it in practice. Evans wrote: “It is therefore wholly inappropriate that the IA issued to parliament repeatedly compares the new [discount rate] of minus 0.25 percent to the previous rate of minus 0.75 percent and estimates a ‘saving’ to insurers of £230 to £320 million."
ABI said that rather than saving insurers money “the unexpected decision to set a new rate of minus 0.25 percent will add costs to the system” and put further pressure on premiums.
“Your department can be in no doubt this is not an accurate reflection of the current market situation because it has worked so hard with HM Treasury over the last 2.5 years to ensure it never became so,” Evans wrote. “No such saving exists to be passed onto customers. I would urge you to submit an accurate and more balanced IA to parliament before the new statutory instrument comes into force on August 5.”
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