In January 2017 the then Lord Chancellor, Liz Truss, announced a major change in the formula used by UK courts when calculating the compensation to be paid to individuals who had suffered life changing disability as a result of accidents.

These changes, the first since 2001, caused a major re-appraisal of funding reserves by the NHS and the insurance industry. The financial implications of the changes drove the government, under a new Lord Chancellor, to review the proposals and the results have only now been published.

The effects of the revised proposals are still being considered and it seems likely the outcome will fall somewhere between the original proposal and the review in terms of the financial impact.

Here’s a brief note we have prepared to keep our clients informed of these developments:

The Ogden Tables are a formula used by UK courts when setting appropriate levels of compensation in cases of severe and permanent disability caused by the negligence of other parties. The Tables try to project the “lifetime” investment growth when compensation payments have to be invested for future needs.

The Tables were last revised in 2001 and the need for revisions since then to reflect factors such as changes in interest rates and stable investment returns has been met with inaction by successive UK governments who are responsible for the rates used.

In 2017, the Lord Chancellor announced a significant change in the rate to be used by the courts in future. The first proposal has been the subject of a review and it is likely that the new Ogden rate when finally set will be reviewed on a more regular basis – perhaps every four years.

This change will affect UK insurers in the areas of Employer’s Liability, Public Liability and Products Liability as well as, principally, Motor Insurance.

A change to the Ogden Rate will impact not only on future personal injury claims but also those already in the pipeline and for which no consideration could be made at the time of setting the insurance premium.

UK insurers are already responding by reserving substantial additional funds to meet current personal injury liabilities and also reviewing their premium pricing to reflect the anticipated increase in injury claims costs from now on.