Consumer Intelligence considers imminent Ogden rate change

Consumer Intelligence has looked ahead to the upcoming change to the Ogden rate, due to be announced on 15 July.

The Ogden rate is a crucial factor in determining compensation for personal injury claims and was reduced from 2.5% to -0.75% in 2017 and then amended to -0.25% in 2019.

Ian Hughes, CEO of Consumer Intelligence, said, “The industry is on tenterhooks, hoping for a positive change in the Ogden rate. The financial pressures from the recent years, including the pandemic and economic downturn, have left insurers and consumers alike eager for some relief. A favourable adjustment could ease premium rates and offer some breathing space.”

As part of a recent government consultation, a multitude of options have been considered, including the possibility for introducing a dual rate to create more equal outcomes between claimants investing over different periods, leaving the upcoming announcement result more uncertain. 

Hughes said, “The smart money has the rate at between -0.25% and 0.5% and based on historical trends, a significant increase in the Ogden rate to around 0% to 0.5% is likely to lead to a decrease in car insurance premiums by approximately 5-10%. This will be a welcome relief for consumers but may also create an opportunity for insurers to improve their combined operating ratios if all the amount is not passed on. We are already seeing signs that some insurers are taking bets on a fall and are pricing this into their new business and renewal pricing. That might be a very good move; we will wait and see.

“There will undoubtably be winners and losers as a result of this change. The winners will be those with the capacity to write new business and those who can retain customers with competitive renewal pricing. Losers will struggle with capacity and may have to back out of the market temporarily.”