Impact of Ogden “far greater” than floods – ABI

Trade association’s head says the discount rate is the single biggest issue facing insurance

Impact of Ogden “far greater” than floods – ABI

Insurance News

By Terry Gangcuangco

The impact of the Ogden rate – the discount rate used in calculating compensation payments for personal injury claims – is "far greater than any of the floods combined" if objections to this year’s adjustment are not heeded, according to the Association of British Insurers (ABI).

The ABI has been lobbying against the government’s move to adjust the rate from the longstanding 2.5% to -0.75% last February. Approximately £2.4bn of losses have already been disclosed publically following the change in the Ogden rate.

Willis Towers Watson estimates a £5.8bn cost due to the unwelcome rate change, with payouts for flood-related claims for the past decade even lower at £4.8bn, according to a report by The Telegraph.

"The discount rate is the single biggest issue facing the totality of the general insurance market, there's no question about that," the report quoted ABI director general Huw Evans as saying. He argued that taxpayers, motorists, and businesses all feel the brunt.

Professional services firm EY has estimated the overall cost of the rate change to be £3.5bn across all lines of business. EY said most insurers have already reflected the impact on outstanding claims in their figures for 2016, leading to significant underwriting losses for the motor insurance market.

Last week, the economic secretary to the treasury assured insurers that pleas for further review have been taken into consideration. “We want to make sure that the way the [Ogden] rate is set is put on the firmest possible footing in future, so that we have a better and fairer system for claimants and defendants,” said city minister Steve Barclay.


Related stories:
We’ll reform Ogden – new City Minister
EY reveals how much the Ogden change is costing the insurance industry
 

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