What do you know about the Ogden rate? Also known as the discount rate, this is used to work out the interest of the compensation pay-out amount that victims who have suffered life-changing injuries will receive to cover their future losses. As victims can invest their pay-out, this rate dictates the percentage of the pay-out which will be deducted by insurers.
Having dropped from 2.5% to -0.75% in 2017 in a move which was frowned upon by many insurers, this rate has recently seen an increase from -0.75% to -0.25%.
What the increase means
When this rate is negative, it means that instead of deducting money, insurers pay more out than a claimant is predicted to need. With the current increase in place, it now means that victims will receive a smaller pay-out amount from their insurers. Despite the increase, however, this change has fallen short of insurer expectations, with experts predicting it would rise to between 0 and 1%. This has since sparked warnings that car insurance premiums may rise as a result.
Steve Rayner, General Insurance Channel Manager at PayingTooMuch.com said: “Due to the change in the Ogden rate, it’s thought that the average motor insurance policy is likely to increase by £10-£15, but for younger drivers this may be as much as £50-£75. Because of the increase, now is the ideal time to switch to another policy to save money. At PayingTooMuch.com, we will compare car insurance from our panel of leading insurers, so you will always get our best price. If you have been with the same insurer for the last 2 years, now is the time to switch and potentially save a substantial amount.
Overcompensating victims
Martin Milliner, General Insurance Claims Director at insurer LV, believes that this change means that claimants receiving large pay-outs will continue to be overcompensated. While this may not seem like a negative for those receiving the pay-out, the knock-on effect means that millions of other car insurance customers will be affected, with younger drivers particularly affected.
Managing your car insurance
While this change does mean a likely increase in car insurance premiums, there are plenty of things that drivers of any age can do to reduce their premiums in other areas to balance out the costs. Younger drivers may benefit from telematics, including black box technology, while more experienced drivers can consider combining their home and car insurance, considering additional security devices and more.
If you are concerned about your car insurance premium or want to talk to our team about finding the right policy for you, get in touch on 01243 219 300 or visit our car insurance page.
