The insurance industry were all down the pub celebrating their latest windfall after convincing the government that the compensation culture and fraud epidemic sweeping the land was ruining peoples life’s (despite not showing any data to back up this fraud epidemic and despite falling numbers of personal injury claims) so that the government have dusted off the whiplash reforms (after agreeing to shelve the proposals to reform Whiplash prior to Christmas) and magically decided to implement the reforms.
Sadly the empty promise of a few insurers (as not all the insurers agreed to pass on the savings) to pass on the £40 per policy savings to policy holders that the insurers say they will save (yes once they have paid their share- holders multi million pound bonuses) is now very empty as they are now claiming that the £40 plus some will have to be added to offset what they will have to pay out as a result of the change in interest calculated for personal injury claims.
In an odd but logical move the government adjusted the Ogden rate to more realistically reflect current low rate of interest. The Ogden rate is used to calculate how much total compensation is paid out to a seriously injured person. Lets be clear here in that this effects seriously injured/ life changing injured people.
The change that has upset the insurers so much is that up until recently they can calculate inflation @ 2.5% (what this means is that a lump sum paid out today once invested is assumed to earn 2.5% every year that the injured person is alive and in doing so could get away with paying the injured person £975 for every £1000 they were due. In real terms this means a person injured with life changing injuries through no fault of their own if Awarded £1m the insurer under the old system would have saved £25,000, under the new system they would have to pay the £1m plus £7,500).
And don’t believe all the hype that ‘so what £1m is a shed load of money’, £1m is really only £25,000 a year for 40 years, so if this accident happened when you were in your 20’s then it would run out in your 60’s.
