Personal Injury Claims and the 'Ogden Rate'

Something to think about when setting your Public and Employers Liability Limits of Indemnity... 

 

Did you know that Personal Injury claim amounts are adjusted by the courts to allow for expected future returns on capital investment? 

 

When calculating a Personal Injury claim settlement, the courts apply what is known as 'The Ogden Rate' which is calculated using the Ogden Tables to work out a capital sum that will indemnify the injuried party sufficently enough to allow for expected rates of return on investment for the time they are unable to work, which can for the duration of their life. 

 

Also known as the 'Discount Rate', it has historically been set at a positive 2.5%, meaning that any claim amount is reduced accordingly to allow for expected return on capital each. 

 

In March 2017 however, it was revised for the first time in 16yrs from a positive to a minus -0.75% to account for poor interest rates and low yielding returns. This sent shockwaves through the insurance market as it meant that any claim was then loaded sufficently, having a major impact on insurers Reserve Accounts and their Capital Requirements, which in laymans terms means they have less capacity to write more risk with the available capital.  

 

The Government provided some relief to insurers in May 2021 this year by reducing from minus -0.75% to minus -0.25%, though a reutrn to positive was expected by many.  

 

In a nutshell, any business operating in a high risk industry HSE Stats 2020 need to ensure that they have sufficent Public and Employers Liability Limits of Indemnity to cover any claim brought against as previously accepted limits are no longer sufficent. If you operate in a High Risk Industry and exposed to aggregated losses (i.e. where mulitple parties can be injured in one incident) need to consider even higher limits of indemnity. 

 

For more information, please dont hesitate to contact one of the team on 01904 217455 or send an email to enquiries@johnsoninsurance.co.uk and one of the team would be delighted to assist you.