EY’s response to today’s Ogden Rate Announcement
7 September 2017
Tony Sault, UK General Insurance Leader for EY, commented on the Government’s proposed legislation with regard to the Personal Injury Discount Rate:
“We think that motor and liability insurers will welcome the revised proposals – not only because of the cost impact, but also because of the promise to build in a three-year review process which will hopefully avoid the impact of large rises going forward.
“Earlier this year, EY estimated that the changes to the discount rate would cost the insurance industry an additional £3.5bn and add 6.5% to customer premiums and we found these numbers were closely borne out in practice.
“We believe the new proposals, which the Government expects to imply a real rate of 0% to 1%, will have a significant impact on these costs. A revision to 0% could reduce these costs by one-third meaning reserve releases of £1.2bn, while a change to 1% could reduce this by two thirds, meaning up to £2.5bn could be saved by insurers and reinsurers compared to their current booked position.
“We would also expect the recent rise in premiums to level off in anticipation of the new legislation, and ultimately premiums could fall between 2% and 4%, saving up to £21 on the average premium to the consumer.”