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The Ogden Discount

If we mention the ‘Ogden Discount’ to you, you’d probably look at us blankly. However the decision taken by the Lord Chancellor, Liz Truss, to change the way insurers calculate compensation awards for serious personal injury could have an impact on your insurance premiums.

In a nutshell the Lord Chancellor’s decision ensures inflation doesn’t erode the future value of compensation awards, most of which are paid on behalf of clients by their insurers. For instance, your motor insurer may make a settlement to a third party who you injured in a motor accident or as an employer, your insurer may pay compensation to an employee injured at work.Woman meeting a consultant

If the government proceed with the changes (and there is speculation in the press they may re-think) then in the event a 25 year old sustained a brain injury and was awarded £100,000 a year for life, under the old system he would receive total pay-out of £3.1m. Compare this to the new system where the award would increase to £8m.

Whilst the welfare of the victims of accidents is clearly important, insurers and brokers alike have expressed concerns as to the impact this might have on premiums. Added to this are brokers concerns around just how much cover you should actually buy. We frequently recommend our commercial clients to arrange public liability cover with a limit of at least £10m. If ‘Ogden’ proceeds we may well have to ‘think again’.

If you have any concerns about the adequacy of your cover please speak to us. We are here to help.

By Laura Scott Cert CII – Commercial Account Handler

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