John’s future financial requirements are calculated by applying a formula to the present day calculation of John’s financial needs (eg loss earnings net of tax and the cost of nursing care etc) with the aim of producing an accurate lump sum. The multiplier also takes into account mortality risks and most importantly, that John will receive the lump sum up front and that it will be invested and will earn interest. Using the old Ogden Discount Rate, the total nursing care element of John’s claim and loss of earnings totals his claim at £2,791,000 . Under the new 2017 rate, John’s settlement value is £6,325,000 – increasing the amount his insurer will need to pay by over £3.5m or 127% . As you can see from John’s example, the change in the Ogden Discount Rate from its current +2.5% to -0.75% results in a significant increase in the total settlement of a claim.
How will all this affect my insurance premium? According to the comparison website moneysavingexpert.com, the average car insurance policy now costs 11% more than 2016 and £200 more than 2015. It is therefore imperative drivers ask for advice from a broker or insurance representative in order to ensure that their insurance cover remains accurate and premiums are as competitive as possible. Scrutton Bland offer insurance cover for all commercial and private vehicles. With almost 100 years’ experience of helping our clients find the right cover and managing claims, our team of specialists are on hand to help. For more information please contact Dan Bligh at daniel.bligh@scruttonbland. co.uk or 01206 838419
What does the insurance industry say? Huw Evans, director general of the Association of British Insurers (ABI), which represents the insurance industry commented: “This increase drives home how important it is that the government press ahead with a new framework for the discount rate and call a stop to further hikes in insurance premium tax.” That comment should be balanced by the recognition that the discount rate of 2.5% has been considered as being far too high for a sizeable period. Many in the legal profession would say that the most seriously injured victims of accidents have been undercompensated for many years.
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