Amid all the talk of the Great Brexit Repeal Bill and the switch of Lloyd’s of London to a Brussels base, most news stories have been lost in the shuffle today – but for insurers and brokers alike, one item has stood out even above its headline-grabbing counterparts.
That piece of news surrounds the Ministry of Justice’s review into the personal injury discount rate (Ogden rate) framework – with a consultation officially confirmed by Lord Chancellor Liz Truss today.
“This consultation will consider whether the current framework is fair to both claimants and defendants,” Truss said today. “It will also determine whether there needs to be changes in how the rate is set and whether it should be set by an independent body.”
The discount rate has been the subject of widespread dismay around the insurance industry since the decision was taken to not only cut the rate for the first time since 2001, but to slash it – namely from2.5% to -0.75% a move that was instantly branded as “crazy” by the Association of British Insurers.
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The revised rate was officially introduced on March 20, but this consultation does not promise to review the rate itself – instead it plans to look into how the rate is determined including: the current methodology used to calculate the rate; whether it should be set by an independent body; and if periodical, rather than lump sums, would offer a better way to compensate victims.
The consultation is expected to take around six weeks to complete, at which point the Ministry of Justice will offer “any necessary legislation to strengthen the way in which the rate is set.”
The Association of British Insurers has once again reacted to the news – this time speaking more favourably about the Government’s actions but maintaining that more needs to be done.
“This consultation document is an important step forward in helping get a fair, modern way to set the Discount Rate which works for claimants, consumers, businesses and taxpayers,” said Huw Evans, director general of the ABI.
“Only a month after the setting of an absurdly low rate, the Government has moved swiftly to consider reform and we need to see this urgency maintained with a firm commitment to legislate in the Prisons & Courts Bill currently before Parliament. As the only major economy in the world with a negative rate, the UK will face significantly increased insurance and taxpayer costs until the system is reformed and a new rate can be set.”
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