How Ogden affects your public liability

How Ogden affects your public liability

Earlier this year it was announced that the Ministry of Justice would be cutting the Ogden discount rate from +2.5% to -0.75%. Though this rate change doesn’t at first appear significant, it will have huge ramifications for both insurers and policyholders. Businesses could be severely exposed as a consequence and we strongly recommend that clients reconsider the levels of public liability cover they have in place.

What is the Ogden discount rate?

  • The Discount Rate, also known as the Ogden Rate, is a calculation used by courts to quantify how much insurance companies should pay out to claimants who have suffered life-changing injuries.
  • These lump sum compensation payments are adjusted according to the expected interest accrual through investment.
  • For example, a 30-year-old male earning £25,000 annually is injured. Under the old rate, an insurance company would need to pay out £2,791,000 to cover the £75,000 needed annually for the rest of his life. Under the new rate, the same settlement would cost £6,325,000 – an increase of £3,534,000 or 127%.
  • The rate is set by the Lord Chancellor and was last changed in 2001.

What does this mean for me?

The significant change to the discount rate is expected to cost the insurance industry millions of pounds as insurer payouts increase dramatically. Indeed, Huw Evans, the director-general of the Association of British Insurers and a former Downing Street special adviser called the decision “crazy” and has publicly stated that the hit will cost more than the flooding in Northern England over the past decade.

It is predicted that the change will force insurers to drive up motor and liability premiums in an effort to balance the books. In addition, it may become more difficult to secure liability insurance and policies which incorporate personal injury cover.

Though the announcement has caused a degree of turbulence, AT&A is working closely with insurers to secure the most competitive arrangements available. If you have questions on how this may impact your policy please get in touch with your account manager or contact us on