Ogden Discount Ruling Information & Guidance

On Monday 20th March it was announced by the Ministry of Justice that the Ogden discount rate would be reduced from 2.5% to -0.75% and this change would take effect immediately.

This is an important change that will have a substantial impact on policies where personal injury claims can occur so we have provided some helpful key points below to help you to understand the change and the reasons for it.

What is the Ogden Discount Ruling?

When assessing lump sum awards for personal injury claimants, the courts take into account the net rate of return (discount rate) the claimant might expect to receive from a reasonably prudent investment of lump sum compensation. This is to ensure that a severely injured person has the necessary financial security to provide for their care and loss of earnings.

Why has the rate been changed?

A review of the Discount Rate was undertaken by the Lord Chancellor in response to years of pressure by the Affiliation of Personal Injury Lawyers (APIL) and on 7th December 2016 the decision was made to reduce the discount rate by 3.25 points to -0.75%.

What impact will this have?

The reduction means those suffering from serious injuries will receive significantly higher compensation payments than before.

As a result, insurers will incur significant additional costs in any class of insurance where there is an exposure to personal injury including: Private and Commercial Motor, Motor Trade, Casualty (Employers Liability, Other Liability and Contractors Liability) and SME.

More importantly the rate change applies retrospectively to all current claims, where current reserves may be reviewed and amended, as well as new claims.

If you would like further information or advice on this matter please contact your usual Reason Global account manager on 01273 739961.