Downward pressure on motor premiums as the Lord Chancellor updates the Personal Injury Discount Rate – LCP

Today - 2 December 2024 - the Lord Chancellor announced the Personal Injury Discount Rate (PIDR) for England and Wales will be raised from -0.25% to +0.5%, aligning with the rates set in Scotland and Northern Ireland earlier in the year.

The PIDR (or Ogden rate) is a statutory rate set at least every 5 years, and is used to help courts value the largest motor injury claims. The rate is linked to investment markets, which have evolved significantly since the last discount rate review in 2019.

The PIDR affects the costs of settling the largest motor injury insurance claims and is therefore a key factor in the premium rates that insurers charge for motor insurance.

Commenting on the rate change, Ed Harrison, partner in LCP’s Insurance Consulting practice, said: “The increase in the discount rate from -0.25% to +0.5% should put downward pressure on premium rates in the UK motor market. We’ve seen premiums rise by over a third between year-end 2022 and 2023, so this announcement should provide some good news for policyholders.

The rate change aligns with industry expectations, so any relief is likely to stem from greater overall pricing competitiveness rather than a direct reaction to this announcement.

In addition, the personal injury discount rate is now consistent across the whole of the UK, so claimants can expect access to similar levels of compensation for serious injuries, irrespective of the UK jurisdiction in which their accident occurs.”