Get Your Ship in Shape
routeONE magazine|15 March 2017 - Issue 681

A change to the Ogden tables means that insurance premiums are rising by at least 10-15%. What can you do to protect yourself?

The consequences of the Lord Chancellor’s decision to amend the discount rate in the Ogden tables to -0.75% will easily be overlooked by operators.

What won’t be overlooked is when your renewal premium jumps by anything from 10-25%.

This will affect all operators. It’s a big hike and you need to take action now – even if you are on a long-term deal and renewal is some way off.

The tables

The ‘ Ogden’ tables help actuaries, lawyers and others calculate the lump sum compensation due in personal injury and fatal accident cases.

Nicknamed after Sir Michael Ogden QC, who was on the working party for early editions (1984 onwards), their correct name is Actuarial Tables with explanatory notes for use in Personal Injury and Fatal Accident Cases.

The calculation is used in large personal injury claims settlements where the injured party is severely incapacitated and unable to enjoy their former quality of life.

Large settlements comprise two components – a lump sum paid by the insurer, lower than the total agreed compensation, and interest the claimant can earn by investing the lump sum.

Together, these are supposed to deliver the agreed settlement sum, which typically runs into thousands of pounds, in such cases.

Since 2001, the calculations have been based on the assumption that the injured party can access an interest rate of 2.5% for their lump sum investment.

However, due to the sustained period of very low interest rates, the Lord Chancellor has moved the Discount Rate to -0.75%, as from 20 March.

It means that for every £1,000 paid in a settlement, £25 was formerly supposed to have been delivered by the 2.5% interest accrued each year. This meant that the insurer only paid £975.61 per £1,000.

With the new rate, insurers now have to pay £1,007.56 per £1,000 in the settlement. This adds up to millions of extra pounds to find.

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