The government is to introduce the Civil Liability Bill to parliament today, including reforms to the Ogden rate calculation
The government said it will today launch the Civil Liability Bill in parliament, including revisions to the Ogden rate.
The Ministry of Justice said this morning that the Ogden discount rate on compensation payments for long term injury will be set on the basis of rates of return on a low-risk diversified portfolio of investments.
Until now it has been based on returns on very low risk investments, a calculation that caused it to be cut from 2.5% to minus 0.75% last year. That change caused insurers to make huge provisions against future payouts.
From now on, the Lord Chancellor will consult an independent expert panel chaired by the Government Actuary, with HM Treasury remaining a statutory consultee; and the discount rate will be reviewed promptly after the legislation comes into force and, thereafter, at least every three years.
The Civil Liability Bill will be introduced in the House of Lords later today. It is expected to come into law next April. Among other reforms, it will raise the small claims limit to £5,000, under which threshold litigants will not be able to claim for legal costs. It will also introduce a system of tariffs for injuries.
Motor insurer Ageas welcomed the Ogden announcement.
UK chief executive Andy Watson said: “The existing discount rate is having a detrimental effect on taxpayers, consumers, the NHS and the UK insurance industry. Our policy holders have endured over a year of high motor insurance premiums following the decision by a previous Lord Chancellor to set the discount rate unfairly low.
“On behalf of our customers we welcome that the Government is now recognising a more accurate level of investment risk meaning that we can still provide a fair level of compensation for claimants, while ensuring the preservation of an insurance sector able to deliver this essential service to customers at a competitive price.”
“It is important now that the Bill progresses quickly, the panel put in place as outlined in the consultation and the discount rate revised accordingly.”
AXA UK and Ireland chief executive Amanda Blanc said the Ogden plan “strikes the right balance between under and over compensation”.
“Fairness and transparency for personal injury compensatin is something that everyone can agree on,” she said.
“It is only right that it works in everyone’s best interests.”
She added that the planned whiplash reforms “will drive the worst behaviour out of the market, protect honest motorists, reduce the cost of insurance and we of course commit to passin ona savings to every motor customer.”
ABI director general Huw Evans also welcomed the announcement.
“If passed, these proposals would be great news for motorists. People and businesses are paying more for their motor insurance than ever before and we need changes to the law to tackle some of the root causes. Soft tissue injury claims have been rising year on year since 2014 as cold calling claims firms have thrived, driving up the cost of insurance,” he said.
“This Bill will ensure people in England and Wales receive fair compensation while reducing excess costs in the system. In a competitive market such cost benefits get passed through to customers, as they did after previous reforms in 2012 when average motor premiums fell by £50 over the next two years.
“The sensible new framework proposed for the personal injury discount rate would also deliver a system that is fair for customers, claimants and taxpayers. It is now important that parliament agrees these proposals swiftly so people across England and Wales can start to see the benefits.”
Steve White, Biba Chief Executive said: “The bringing forward of this bill covering both whiplash fraud and the way the discount rate is calculated is clear evidence of government listening to the carefully considered concerns from the insurance industry and taking forward recommendations in our Manifesto.”
Graeme Trudgill, Biba Executive Director said: “Biba welcomes this legislation which aims to bring about fair, 100% compensation for personal injury claims and should help millions of policyholders by reducing the pressure on the cost of insurance. The legislation is also needed to assist with the unintended consequence of underinsurance, created when the discount rate changed so significantly a year ago.”
“Allianz’s objective has always been to compensate genuinely injured people quickly and fairly without influence from disproportionate legal costs, so we welcome the whiplash claims provisions within the Bill,” said Simon McGinn, Allianz UK’s general manager commercial and personal .
”The principle of fairness is also embodied in the industry’s position on the Discount Rate and the measures announced provide a structure around which this can be achieved. We look forward to seeing the Bill progress into Law and to the benefits that will accrue to customers as a result.”