Ogden Rate decision will be published 3rd August

The Ogden Rate, which was adjusted in February from 2.5% to 0.75%, following the sustained period of low interest rates, has been under weeks of consultation and the outcome will be announced this Thursday.

The rate adjustment saw insurers up in arms as the changes meant that defendants would see an additional financial hit as lump sum rewards would become more attractive as opposed to periodical payments. The knock-on effect being a rise in insurance premiums for consumers, business and public-sector organisations.

Van Insurance has been particularly hard hit with annual insurance premium increases of around 29.5%. “The acceleration in insurance costs for van drivers is down to the Ogden changes in March with tax rises and claim costs adding to the pressure,” said Consumer Intelligence pricing expert John Blevins. “Before the Ogden rules came into effect in March, prices were rising by around 1% per month and then rocketed by 11.4% in April with the Insurance Premium Tax rise in June adding another 2%.”

Many feel that the mechanism for calculating compensation payments is outdated and as a result the government have conducted consultations over the period of a couple of months to review the reform plans.

Fleet Managers were urged to pro-actively tackle the issue to cushion the blow when their insurance renewals come around. Insurers have been needing to utilise a significant proportion of their profits to ensure that claimants, both in the past and new, can receive the settlement sum that was agreed.

The overall cost of the Ogden rate change was estimated to cost £3.5 billion across all lines of business as calculated by experts in the field. It has been the single biggest issue facing the insurance market, affecting taxpayers, motorists, and business in the process. Intense industry lobbying during the period of consultation has raised hopes for a possible reform announcement.

In the meantime, the announcement on the new Civil Liability Bill to tackle the number and cost of whiplash claims to the insurance industry has been welcomed. It aims to only pay full and fair compensation to those with genuine injuries. The bill prohibits whiplash settlements to those without medical evidence as well as introducing a new fixed tariff on compensation.