North American businesses with UK operations could now face unanticipated premium increases on liability cover following a change in the way UK courts assess lump sum awards for personal injury and fatal accident claims.
A recent cut in the ‘Ogden’ rate used by UK courts when calculating the quantum of claims represents a dramatic change to UK personal injury law, and is resulting in substantial and often dramatic increases in claims settlements due to its compounding effect.
UK motor insurance premiums were hit first, following recalculation of insureds’ major reserving amounts earlier this year. Whilst the rate cut’s impact on the UK automotive insurance market has attracted headlines across UK trade and consumer press, awareness of similar consequences is far lower amongst insureds in sectors like marine and transport.
What is the Ogden discount rate?
The Ogden rate is a discount applied to personal injury and fatal accident compensation payments to calculate the total lump sum to be awarded to claimants. Its purpose is to ensure that the agreed settlement amount accurately reflects any future loss of earnings or additional costs, whilst also taking into account any interest that will be earned.
The discount rate is based on a number of factors set out within the Ogden Tables. Factors include the period of loss or expense for which the individual claimant is to be compensated, expected retirement age and the gender of the claimant, or, where appropriate, the claimant’s dependants. The tables set out multipliers relating to these, which are used to determine the final settlement value.
Areas of impact for insureds
The two main areas where UK insureds with automotive third party liability, employers liability, public liability and products liability cover could be at risk are:
- Having insufficient liability coverage limits in place, thereby potentially exposing them to significant additional costs in the event a claim was to be made under the new regime
- Increases in future premiums given that insurers are already choosing to transfer the financial impact onto their customers
We’re here to help
Miller has a dedicated team to support you and your clients in mitigating insurer’s position and minimising any potential premium increases. Simply contact with either Jeremy Dutton or Charles Clarke.
You can also download our Quick Guide to Navigating the Ogden rate cut for more information, including our advice to UK insureds in the marine and transport sector.