Brace for it, says McCarron Coates

What has been described as a shock change to the Discount (Ogden) Rate has led McCarron Coates to believe some operators could be put out of business. The bus and coach industry insurance specialist claims the change to the rate will lead to rises in premiums and says there is talk of insurers pulling out of fleet insurance.

McCarron Coates suggests operators should ‘assume the brace position’ ahead of their next insurance renewal. The alteration to the Discount (Ogden) Rate has fallen far short of insurers’ expectations. The Discount Rate has gone from minus 0.75% to minus 0.25%.

The Ogden Rate governs the discount an insurer receives when paying out large lump-sum compensation payments to those with life-changing injuries. While a sum is awarded for each case, that is taken to be the sum that the injured party should receive over their lifetime, taking into account interest that can be earned on an invested lump sum. The insurer, therefore, pays out the amount that is the total awarded sum, minus what the Ogden Rate determines should be the interest that can be earned over the years ahead.

While, at face value, this is predicted to enable insurers to cumulatively save between £320m and £500m a year, the short-term impact is not predicted to be a favourable one for those seeking insurance in higher-risk sectors, like motor.

McCarron Coates director, Ian McCarron, said: “There is already talk of some insurers pulling out of some higher risk sectors – like fleet insurance – and almost certainly increases in premiums are on the way, of a size that could affect the affordability of insurance for some fleet operators and potentially put some out of business.

“With the likelihood of a no-deal Brexit ahead, the picture is extremely murky for any fleet transport operator heading towards their first renewal after the rate revision.”

  •  For more on insurance, see our insurance and finance feature in next week’s issue.


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