General insurance provider, Berkeley Alexander, warns brokers that some GI rates are on the increase as a result of the Ogden rate change to -0.75% which came into force on 20th March.
The change, which effects all personal injury claims for both personal and commercial GI, has had a dramatic impact on insurers’ profitability which has resulted in rate increase as costs are passed on to customers.
The Lord Chancellor, Liz Truss, has announced a change to the Ogden discount rate, which is used to calculate compensation awards for serious personal injuries, to ensure inflation does not erode the future value of a payout set against historically low returns on investments. However, the unexpectedly deep cut in this rate, from 2.5% to –0.75%, has prompted a furious backlash from insurers amid claims that it will “overcompensate” injured victims. In an example from insurer LV= it said that if a 25-year-old sustained a moderate brain injury and was awarded £100,000 a year for life, under the old system the total payout would be calculated as £3.1m; under the new discount rate, the same person would be awarded approximately £8m.
Commercial customers face higher premiums to protect themselves against liability claims, whether it be an employee or member of the public suffering a life changing injury.
The Association of British Insurers (ABI) thinks that the rate change is ‘reckless in the extreme’. It estimates that up to 36m individual and business motor insurance policies could be affected in order to overcompensate a few thousand claimants a year.
Geoff Hall, Managing Director, Berkeley Alexander, said: “We are already seeing insurers coming through our systems alerting us to rate increases. Claims costs will soar, making it inevitable that there will be an increase in Employers & Public Liability premiums for businesses across the UK as well as impacting their costs on insuring their works vehicles. Rising premiums will be of concern to clients and it offers brokers who have business clients an opportunity to review their insurance needs, whether they be commercial risks or motor fleets.”
For further information please contact:
SJ Douglas, Spotlight Consulting: email@example.com 07909546104
Kelly Prior, Spotlight Consulting: firstname.lastname@example.org 07730572878
About Berkeley Alexander Ltd:
Berkeley Alexander Ltd is a general insurance provider, offering IFAs and mortgage brokers a wide range of personal and commercial lines of insurance. Drawing on a large number of insurers, it is known for its comprehensive range of competitively-priced products and for its innovative approach to distributor partnerships.