Insurers are breathing a sigh of relief today after the Ministry of Justice announced a softening of its drastic cut to the Ogden Rate. The original change, from 2.5 per cent to -0.75 per cent, caused dismay in the insurance industry when it was announced earlier this year. However today the MoJ said the rate will instead be set between 0 and 1 per cent.
At least one insurer has been able to update their rates after last week’s announcement about changes to the way compensation payouts are calculated.
Many insurers were caught off guard by the Ministry of Justice (MOJ) announcement because the reduction in the compensation discount rate is much larger than expected. The change has angered many in the industry as it means that motorists will have to pay significantly more for their car insurance.
However Gary Humphreys, Group Underwriting Director of Markerstudy, said that thanks to his company’s cutting edge technology, it implemented the changes as soon as they were announced.
Insurers anticipate that average car insurance premiums could increase by up to £75 a year as a result of a government ruling which was announced today.
The Ministry of Justice (MOJ) has announced a new formula for calculating the compensation payments which are awarded to claimants with long-term injuries. Insurers had been anticipating a change to the discount rate – also known as the Ogden rate – which is applied if an insurance company makes a lump sum payment to a claimant. However, the change from 2.5% to negative 0.75% is much bigger than any insurance company anticipated. Some insurers had announced that they had provided for a discount rate move to 1.5% or 1%; with the most conservative rate move anticipated as 0.5%.