Hauliers may be in for a surprise when the time comes to renew their insurance premiums since the Lord Chancellor released details of a proposed change to the way that compensation payments are calculated.
The discount (or interest) rate used to calculate these payouts will be cut from 2.5% to -0.75%, to reflect the fall in inflation-linked government bonds since 2001, when it was last revised, reports the Road Haulage Association.
“The effect of the change will be to increase the amount insurers have to pay claimants to reflect today’s lower interest rates,” RHA Chief Executive Richard Burnett said. “But the cut is bigger than most insurers expected. They have no choice but to increase their premiums and motorists and hauliers will have no choice but to pay them.
“We are very concerned that the formula used to set the levels of compensation, the Ogden rate, should be reviewed and updated annually. This would ensure that compensation remains fair and reflects prevailing economic conditions. The reality is that it has been left unchanged for 16 years. This is both irresponsible and unfair as businesses with high motor insurance costs such as road hauliers could be seriously affected.“