2017
Ogden Rates & Implications for Employers On 27th February 2017, Lord Chancellor Elizabeth Truss announced a new discount rate of - 0.75 per cent for personal injury awards. This new rate commenced on 20th March 2017. Further to our previous brief on the changes to the Ogden rate, Thomas Carroll Brokers now highlight the key implications for you and your business. Liability Exposure The Association of British Insurers estimated that the new discount rate will directly increase motor and liability premiums for millions of UK drivers and businesses, including 36 million individual and commercial motor policies. PricewaterhouseCoopers warned that the average annual comprehensive motor premium will rise by up to £75 and young drivers could see increases up to £1,000. More importantly for businesses, there is a potential risk of serious underinsurance on Employers’ and Public Liability limits. Under the new system, it is possible that the value of some claims which would have been covered before the discount rate reduction, will increase to a level beyond some liability policy indemnity limits. This would leave the policyholder under-insured and potentially having to fund a portion of the claim themselves.
The Right Level of Cover for Your Business The size of your business or contractual requirements should not be your guide to setting your indemnity limits. When deciding what level of cover you require, you must consider your industry sector, its potential for severity losses and the age profile of your own people or third parties you are likely to be responsible for. Many small businesses have traditionally purchased “minimum” policy cover limits. Now, a small building company with a few employees of young age may require higher limits than a large office based consultancy employing hundreds of people. This is because the likely severity of any injury is potentially higher for the building firm and with a young work force, the potential claims settlement increases significantly. Claim Example Recent research has suggested that if a 25-year-old sustained a moderate brain injury and was awarded £100,000 a year for life, under the old system the total pay-out would be calculated as £3.1m. Under the new discount rate, the same person would be awarded £8m. If this injury was caused to a third party, a business purchasing £5m Public Liability would be left exposed to a £3m shortfall. It is possible and straightforward to increase your indemnity limits at any time during your insurance year on Employers and Public Liability covers. Thomas Carroll Brokers strongly recommend that you seriously consider your current level of protection. For more information, contact your account executive or call 02920 887733