B USINESS HELPDESK
MOJ-DRIVEN CHANGES COULD SEE FLEET INSURANCE PREMIUMS SOAR
SO HELP DESK
IN THE LAST three years there were 15,753 crashes on the country’s roads, with 1 in 4 involving a business driver.
When any merchant or building materials supplier of vehicles there is always the risk of a claim occurring. However, with changes in legislation triggered by the Ministry of Justice (MOJ) coming into effect in March the cost of these claims increase. And if the
cost of claims increases, then insurers will raise premiums.
Less than a day after the announcement we have already had insurers quoting rate increases of up to 25% while citing the ruling as the core reason.
What has changed? When victims of life-
changing injuries accept lump sum compensation payments, the actual amount they receive is adjusted according to the interest they can expect to earn by investing it. In amount, courts apply a
calculation called the Ogden Rate or Discount Rate - with the percentage linked in law to returns on the lowest risk investments, typically Index Linked Gilts.
Since 2001 the rate has been set at 2.5% meaning this amount is discounted from the compensation award insurers would pay. From March 20, 2017 the Ministry of Justice has changed the discount rate to -0.75% meaning initial payments from insurers will The reason given for this rate change is the change in yields from the bond market, which is still in a
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The law makes clear that claimants must be treated as risk averse investors, on this lump sum, often for long periods or the duration of their life. Compensation awards using the rate
accident and faces a future care bill of £200,000 per annum would expect to receive a compensation award of £9m under the old discount rate of 2.5%. Following the change to -0.75% he could receive over £20m in compensation. This change makes it inevitable that there will
should put the claimant in had they not been injured, including loss of future earnings and care costs. The Association of British Insurers (ABI) has criticised the decision stating claims cost will soar. For example, a man in his early twenties who suffers a brain injury
“ Less Less t
Less than a day after the
announcement we have already had insurers quoting
rate increases of up to 25% while citing the ruling as the core reason.”
be an increase in motor and liability premiums. The ABI estimates that up to 36 million individual and business motor insurance policies could be affected. Although accepting the need for reform in the light markets, brokers and insurers are petitioning
against the ruling in order to protect their clients against large premium increases.
Reducing the risk (and premium)
A dedicated approach
towards risk management can really pay off – potentially lowering
your premiums, reducing business disruption, as well as protecting your employees.
This could include: 1. Reviewing the basic
procedures for recruitment, induction and vetting drivers.
2. Implementing a positive safety culture towards driving that is evident throughout the entire organisation.
3. Reviewing and monitoring claims trends/statistics. An estimated 75% of commercial insurance
expenses are claims driven. Create and implement a plan to minimise the risks, e.g. driver training or targeted campaigns on accident types.
4. Reviewing in-vehicle technology requirements and implementing a plan to maximise the potential of the technology purchased. No business wants to
incur additional unexpected costs but with proper planning and a positive approach towards risk management there are steps that can be taken to help reduce the potential impact.
will progress urgently
The insurance industry is continuing to work with the Government to minimise the uncertainty for clients. The ABI and a number of insurers have met with the Chancellor of the Exchequer to discuss the impact of the rate adjustment. Following this, the Chancellor
with a consultation on the framework for setting future rates and bring forward any necessary legislation at an early stage.
This consultation, which is due to start before Easter, will consider whether:
• the rate should be set by an independent body in future
• more frequent
reviews would improve predictability and certainty • the methodology is
appropriate for the future. We will continue to update you as these
developments take shape.
For more help and information, speak to Juliette Honnor: tel: 020 8781 9289
email: Juliette.honnor@ - about Insurance Plus which has been
the Builders Merchants Federation.
April 2017 BMJ OA
Juliette Honnor of Bluefin, the specialist insurance broker and provider of BMF Insurance Plus explains the issue and outlines some preventative measures.
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