The Ogden Discount Rate.  What Does It All Mean?

What is the Ogden discount rate?

The Ogden discount rate refers to personal injury rates – it makes it easier to calculate future losses in personal injury and fatal accident cases. When a court is looking at compensating an individual and awarding a fair and suitable amount they take into consideration the Ogden discount rate – the higher it is, the lower the initial lump sum given – the current discount rate is 2.5% and has been at the same level since 2001.

Why is the Ogden Discount Rate getting so much attention?

The Ministry of Justice undertook a review stating there is a duty to ensure personal injury claimants receive suitable and fair compensation – consultations in 2012 and 2013 revealed no results with the issue which is proving extremely controversial.

There are two reasons why the Ogden discount rate is getting so much attention.

  1. The rate has not been adjusted since 2001 and with lowering interest rates the money awarded for personal accidents will not gain much interest – the current rate is far too high and assumes a greater return than is possible, meaning people are in danger of running out of funds.
  2. The rate is having a huge impact in the insurance sector as potentially it means that the reserves for past claims not already settled may rise, future claims could also increase – Direct Line state that a decrease of 1% on the Ogden rate would take £190 million off its profits.

The Association of Personal Injury Lawyers (APIL) believes that the rate has been incorrect for a number of years and would like to see the rate dropped to -0.5%, few believe that this will be considered by the government. A more realistic figure would be to reduce the current rate by 1-1.5% which would still have a significant effect on insurance companies.

The Association of British Insurers have made legal challenges and also recently lost a High Court battle as well as being refused the chance to appeal on the Ogden rate.  Any changes to the rate wicked have a huge impact on insurance companies – more so than the whiplash reforms and insurance premium tax rises.

What does the future hold?

We’ll be posting any updates as and when announcements are made – in the meantime, watch this space.



Picture of Rebecca Haynes
Rebecca Haynes
Rebecca is the Operations Manager at Glowsure and a self confessed insurance nerd. She helps businesses and landlords to retain income and continue trading in the event of a claim.
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