Implications of the Ogden Rate Change

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From 20th March 2017, the Odgen rate of discount has been reduced from 2.5% to -0.75%. The discount rate reflects the level of investment return that a person can expect to achieve by investing their compensation. By changing the rate from a positive to a negative figure the resulting compensation payments are significantly higher.

Allianz Insurance example

30 year old person earning £25,000

Serious injury requiring nursing care for rest of life

Previous compensation = £2,791,000

Revised compensation = £6,325,000


Zurich Insurance example

Claimant fell from 1st floor window

Serve head injury

Previous compensation = £4,600,000

Revised compensation = £9,600,000

As a result of these changes, we are recommending that all clients review their levels of cover. Moving forward, we are recommending a minimum level of Public/Product Liability cover of £5,000,000 and where possible will provide quotations for £10,000,000 of cover as we feel lower limits will not cover large losses.

We appreciate that there is often a significant increase in premium for the higher levels of cover, but in order that we fulfil our duty to recommend cover that meets your stated, and underlying, needs, we believe that strong consideration should be given to the higher levels of cover.

Also note that we expect a ‘knock on’ effect with regards the above, where claims are made on Professional Indemnity or Directors & Officers Liability policies for failure of a professional duty both when the injury was a result of a failure in design or in circumstances where the injury claim amount exceeds the amount of Public/Products Liability in place.

Therefore consideration should also be given to the level of Professional Indemnity and Directors & Officers Liability cover. Please contact your usual account handler in the event you wish to discuss the above in more detail.

Other claims examples – anonymised examples of real claims that illustrate how much the change has impacted the value of claims:

  • Amputated foot whilst claimant was loading a metal press, reserve increased from £2.3m to £3.5m
  • Impact from fork lift truck, fracture to tibia and fibula, reserve increased from £550,000 to £765,000
  • Fall from height of 8m, severe brain injury, reserve increased from £5.3m to £10.6m
  • Cyclist hit a pot hole causing him to fall, brain injury, reserve increased from £6.8m to £10.7m