Ogden Rate Change: Insurance Industry Comment & Analysis

ABI reaction to new Ogden rate

Insurance Edge thought we would round up some views and insight from insurance professionals in the UK, commenting on today’s announcement that the Discount Rate used to assess compensation for serious personal injury claims has been set at minus 0.25%. 

Mike Brockman, CEO of ThingCo said:

“Large motor insurance claims continue to be very costly for the industry and we know that the young driver market plays a significant role in incidences of larger claims and therefore higher premiums.  Utilising the technology to reduce the risk of serious accident and get emergency services to accidents quickly has never been more important and we know the technology is there to do this.

“Telematics has been tried and tested over the last ten years and we know this improves driver behaviour, more importantly when serious collisions do occur – getting the right emergency service support to motorists quickly is not only a matter of life and death, but can play a crucial role in reducing the impact of injuries.

“Insurers need to shift their mindsets when looking at risk and embrace the technology available to help reduce these claims and educate drivers to become safer on the roads.   

“Combining telematics with other technologies such as voice to provide real time in-car risk management and more effective FNOL is the way forward.  That’s what we’re planning to deliver through Little Theo – our solar powered, self-installed telematics device, incorporating intelligent voice, sim card and crash detection, to enable the motor insurance market to deliver next generation telematics services.”

Claimants can invest compensation, but will they get more than 0.25 interest from their investments?
Investments can go up or down, but is the long term average really just 0.25?


Commenting on the Lord Chancellor’s decision, Stuart Hanley, deputy head of Minster Law legal services, said:

“We broadly welcome this humane decision by the Lord Chancellor, which will ensure that critically injured people are properly funded, and the principle of 100% compensation is maintained.

Although a revised upwards rate at minus 0.25% will reduce compensation payments (previously -0.75%) the new rate does reflect the fact that the government accepts it is a risky and costly business for claimants to invest their compensation successfully in order to fully fund the enormous changes in their lives following serious injury.

The revised rate also mirrors the likely outcome of the Damages Act in Scotland, where we understand the Scottish government is due to confirm a -0.25% rate, ensuring there is a level playing field across the UK.  

 In 2017, when Liz Truss MP, then Lord Chancellor, re-set the discount rate at -0.75%, she stated: ‘The law makes clear that claimants must be treated as risk averse investors, reflecting the fact that they are financially dependent on this lump sum, often for long periods or the duration of their life.’

Striking the appropriate balance is of course a difficult task but, on balance we have always believed the system should support the injured person first and foremost, as that, in the end, is what we pay our insurance for.

insurethebox opinion on the revised discount rate for insurance claims payouts


AND-E (Aioi Nissay Dowa Europe), which owns the insurethebox and drivelikeagirl brands, has responded to the confirmation of the new Ogden rate at minus 0.25%.

Warren Hetz, UK Commercial Director, AND-E said:

“It is disappointing that the Ogden rate, used to calculate compensation payments for catastrophic injuries, has been set at minus 0.25%. The change to the rate in February 2017 saw the youngest drivers – who have relatively more large claims and higher premiums – hit hardest.  That was in addition to hikes in insurance premium tax (IPT). We were, therefore, hopeful that Government and its advisors would take this on board when determining the new rate but sadly this has not been the case.

“The inevitability of this latest decision is that insurance premiums will go up. And the youngest, highest risk drivers will continue to carry the biggest burden which is somewhat contrary to so many other Government initiatives designed to improve social mobility for all, and especially the young generations coming into the working world.

“At insurethebox we have maintained a consistent position that the youngest drivers need to be treated differently from more experienced motorists. The development of our market-leading telematics technology means we can calculate the premium of each driver based on their individual behaviour rather than simply assuming all young drivers are bad drivers. The power of telematics to help manage the cost of premiums has also been proven by external data. ABI analysis of motor insurance premiums prior to the impact of the Ogden rate change in 2017, showed that the only age group not to see increases in their average premiums were the under 21s because the increasing use of telematics kept premiums under control. 

“And it’s not just about the premium – the insight we gather from our telematics data helps us support and educate the newest drivers on the roads, as our ground-breaking speed reduction initiative has demonstrated.

For the three years the programme has been in operation, 97,000 drivers have reduced their speed by 20%, leading to a 6.5% reduction in accident frequency.  Using Government data on the impact of speeding on road traffic accidents, we estimate this to have prevented 922 accidents and avoided 29 serious injuries.

“But the reality is, the youngest drivers are still hit hardest by taxes imposed by Government and this will be no different with the latest news about the Discount Rate.”


Commenting on the government’s decision to set the Ogden Rate at -0.25%, Kate Duffy, partner with global law firm Clyde & Co, said:

“This news has wiped the smile off the face of the many insurance actuaries still celebrating England’s cricket win yesterday. -0.25% is a poor result. Yes, it’s better than the proposed -0.75%, but it remains woefully inadequate. From the industry’s perspective, it tips the odds too much in favour of claimants at the expense of insurance-buying motorists and businesses, who will inevitably have to dig deeper for insurance costs.”


Commenting on today’s Government announcement that the Discount Rate used to assess compensation for serious personal injury compensation has been set at minus 0.25% (previously minus 0.75%)

Huw Evans, Director General of the Association of British Insurers, said:

“This is a bad outcome for insurance customers and taxpayers that will add costs rather than save customers money. A negative rate maintains the fiction that a claimant and their representatives will knowingly choose to invest their damages in a way that would guarantee losing them money. This will remain the lowest Discount Rate in the Western world, leaving England and Wales an international outlier at a time when we need to boost our attraction to international capital.”

About alastair walker 6487 Articles
20 years experience as a journalist and magazine editor. I'm your contact for press releases, events, news and commercial opportunities at Insurance-Edge.Net

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