Car premiums in the UK declined by an average of £100 between December 2018 and February 2019, driven by the sector’s response to the passing of the Civil Liability Act in December of last year. Canaccord Genuity questions whether the Ogden reforms will result in further reductions.
The Civil Liability Act introduced whiplash reforms, designed to reduce the volume of fraudulent whiplash claims and lower the cost of soft-tissue claims in general. An update from comparethemarket.com’s Premium Drivers Index, shows that since the bills passing in December 2018, car premiums fell by an average £100.
According to the report and as noted by Canaccord Genuity analyst Joanna Parsons, motor insurers in the UK are already passing on the presumed cost savings driven by the whiplash reforms, despite the legislation not actually being implemented prior to April 2020.
“The question is whether the Ogden reforms will result in further price reductions,” says Parsons.
The Lord Chancellor, David Gauke, announced recently that the first review of the personal injury discount rate (Ogden rate) was to start on March 19th, 2019 and be completed on or before August 5th, 2019.
The Ogden rate was cut dramatically from 2.5% to -0.75% in 2017, a move which hurt the profitability of many UK motor insurers, resulting in outcry from the market and proposed reforms to how the rate is set going forward.
While it remains unclear exactly what the Ogden rate will look going forward, it’s hoped that the ongoing review will result in a more realistic discount rate that is more beneficial for both insurers and consumers.