September 07
Car insurers welcome Ogden u-turn

Today the Ministry of Justice announced the introduction of draft legislation proposing changes to the way the “Ogden” rates are set in future. The Ogden rates are discount rates used to calculate the current value of compensation payments awarded for personal injury claims, taking into account investments that an individual is likely to make and the expected return on these. The lower the Ogden rate, the higher the level of compensation payable, because investment returns are assumed to be lower.

We blogged earlier this year on the surprisingly dramatic change to the Ogden rates announced in February. The rate had stood at 2.5% per year since 2001 but it was updated by the then Lord Chancellor Liz Truss to minus 0.75% per year. A change of this magnitude took insurers, who often pay the compensation claims, completely by surprise as it was widely expected the rate would be set in the 0% to 1% range.

As a result of the outcry a consultation was launched by the Government, the findings of which are reported today along with the draft legislation. The legislation calls for a review of the current Ogden rate to commence within 90 days of the legislation coming into force, and for further reviews every three years. The draft legislation also specifies that the Lord Chancellor must take advice from the Government Actuary and the Treasury. Presumably this is an attempt to avoid the controversy seen earlier this year occurring again in future. Whether this is successful remains to be seen, but the Government have hinted they intend to accede to the insurers’ wishes, noting that under the proposal the rate would currently be set somewhere between 0% and 1% per year.


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