My Basket0

A fall in the personal injury Discount Rate: implications

CII Policy Briefing

Publication date:

02 March 2017

Last updated:

21 June 2018

Author(s):

Policy and Public Affairs

On 27 February, the Lord Chancellor announced that the discount (or 'Ogden') rate used to calculate personal injury claims has been reduced from 2.5% to -0.75%.

The decision implies that the Government expects that a claim recipient investing the damages settlement over their remaining life would get a negative return on investment, and the insurer must top up the expected loss. It will have significant impact on motor and liability policies, as well as public bodies that award compensation, such as the NHS.

Although a correction in the rate was expected by most observers in both sides of the debate, nobody expected the fall to be so severe as to send it into negative values. The announcement follows a long period of inactivity following a consultation and even a legal challenge for further consultation.

The announcement was met with a phalanx of criticism from across the insurance sector, highlighting the implications of the significant drop in the Discount Rate, and the fact that this will transmit to higher premiums for 36 million motor and liability policy holders, particularly those with higher risks of claiming such as young drivers or commercial users.

Pdf icon small  View the attached briefing »

This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.

Comments

No comments have been added to this article.