Changes to the way insurance pay-outs are calculated is one of the most significant issues facing the insurance industry for decades.

It is already showing increased premiums and alarm bells for insurers in the amount they have to pay out.

The mathematical formula, or the Ogden Discount Rate, used to calculate how much the injured party receives has been adjusted nationally.

When injury victims accept lump sum compensation payments, the actual amount they receive is adjusted, according to the interest they can expect to earn on the payment from investment. The discount rate has been reduced from 2.5 percent to -0.75 percent, but because interest rates are so low, the changes to a negative rate mean that insurers will have to increase their pay outs to a sum even higher than the initial award.

The Lord Chancellor, who agreed the changes, has admitted that the change could have “profound financial consequences” but in real terms it has significant implications for insurers with potential additional costs relating to personal injury claims for Motor and Liability insurance, ultimately hitting people in the pocket when it comes to increased premiums.

In short experts have predicted at rates increases of between 10 and 20 percent!

It has brought into question whether or not the limits of cover carried under both the employers and public/products liability policies are adequate.

People are being urged to review limits of liability on policies.

At Gravity Risk Services Ltd we’re experts in navigating through the changes and giving the best, sound financial advice.