JLT says Ogden rate cut could cause further increase in larger claims

The number of larger claims in the construction sector has increased significantly, according to research from JLT.

And the researchers warned that the cut in the Ogden rate announced last year could cause a further increase in large claims.

The research also showed a slight decrease in the number of smaller personal injury claims, which were settled more quickly than previously.

The Employers Liability Claims Benchmarking report surveyed some of the UK’s largest building and civil engineering contractors and compared their employee insurance claims figures between 2009 and 2015.

Catastrophic claims – claims with a total cost of over £1m – increased from four cases in 2016 to nine cases in 2017 - a significant increase of 68%. The average cost for these claims dropped over the year from £2m to £1.5m.

Smaller claims fell 2% to 2.26 per £10m of manual wage roll, from a figure of 2.31 in 2016. That showed a decline of 25% when compared with 2012, which was felt to be most likely as result of the introduction of the Jackson reforms and the Ministry of Justice portal for Employers Liability Claims in 2013.

It is likely that these changes have also had a positive impact on the length of time it takes to settle a claim, down 100 days from 924 in 2016, to 824 in 2017, the researchers said.

Dave Cahill from JLT Specialty’s construction team said: “It’s clear that the changes introduced to reform the civil litigation system are starting to be felt by the construction sector, and it’s encouraging to see such a significant reduction in smaller claims over the last four years. However it’s disappointing to see such a sharp rise in higher value claims, and I suspect that this figure may increase even more in 2018 as we begin to feel the impact of the changes to the Ogden discount rate introduced earlier this year.

“My advice to building contractors for the coming year would be to ensure they have robust claims defence processes in place, optimise incident reporting and spend more time managing really significant claims. Contractors could also look to innovative solutions to further drive down claims such as the use of wearable technology which is having a positive impact on the safety of construction sites in general.”