The Lloyd’s Market Association (LMA) has expressed its support of reforms surrounding the personal injury discount rate in the UK, known as the Ogden rate, in a written letter to the Justice Committee.
At the beginning of the year the Ogden rate was cut to -0.75%, a move that took many in the sector by surprise and that has been widely scrutinised.
Specifically, the LMA has shown its support of the Justice Committee’s ‘Pre-legislative scrutiny: draft personal injury discount rate legislation inquiry,’ while also recommending some further improvements to the draft legislation.
The LMA, via a consultation response, claimed that the current mechanism for setting the rate and the current rate of -0.75%, is driving overcompensation and higher insurance premiums, which is making cover more expensive for both individuals and businesses.
Further improvements put forward by the LMA relate to timing of future rate changes, and sees the LMA call for an announcement on day 1 of any 180 day review, providing clarity on the actual process will conclude.
Furthermore, there should be a specific timescale for the implementation of any rate change, which should take place as soon as possible following the completion of the rate review process and announcement of the new rate, argues the LMA.
Non-Marine Manager, LMA, David Powell, commented; “In May, we responded to the Ministry of Justice consultation by calling for a new process that would provide greater certainty and transparency, reducing the risk of unexpected and significant changes in the rate.
“We believe that the draft legislation meets the Government’s objectives and will deliver a fairer and more predictable discount rate, reducing costs for insurance customers.”