Negative Discount Rate could increase premiums for hauliers
At the end of February the Lord Chancellor Elizabeth Truss announced a major change in calculating compensation payments for personal injury awards, known as the Ogden rate formula. The discount (or interest) rate used to calculate award payouts has been cut from 2.5% to -0.75%, reflecting the fall in inflation-linked government bonds since 2001, when the rate was last revised. Insurers are having to pay more to compensate claimants because interest rates are so low.
In personal injury cases, courts and insurers use the Ogden rate to work out the present value of the total compensation required to support the claimant. The Lord Chancellor justified the change by citing case law that established that awards should ensure that injured victims were put in the same financial position they had been in, had they not be injured.
So what will the impact be on your haulage business?
Businesses are very likely to see the real impact when they come to renew their insurance premiums. Because nothing has changed for 16 years, the change in the discount rate is bigger than most insurers expected. Insurers will inevitably need to increase their premiums and motorists and hauliers will have no choice but to pay higher premiums. Those businesses with high motor insurance costs such as road hauliers could be seriously affected. PWC reckons that an average individual motor policy premium could rise by £75 and young drivers could see increases of up to £1000.
Employers need to take account of the potential impact on motor insurance premiums by putting in place measures to improve road safety for all their company drivers that will minimise incidents and potentially limit risks and motor insurance claims. This could involve training and having strict guidance for all staff that drive as part of their job. https://abournegroup.com/haulage/risk-management/fleet-management-training/
Our team at Andrew Bourne & Co spends time getting to know how your commercial haulage operation works. Our aim is to support you to improve the quality and regularity of your communication with drivers to keep improving road safety and reduce risks. We’ll work with you to create a bespoke insurance solution that’s responsive to your business and we will continue to support you to manage your risks more effectively. If you’d like to speak to us, call David Crowther or one of the team at Andrew Bourne and Co. on 0116 272 0770.