P R
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I have a friend in the insurance market (underwriter at Lloyds).. anyway, there is a rate, the "Ogden" rate which is to do with the reserves they hold, anyway this is his explanation...
Ogden rules which apply to personal injury payments have changed - where there is a lifetime care amount paid as a lump sum insurers could use 2.5% as a discount rate to get effectively a net present value for the lump sum, or I guess if not paying as a lump sum the amount they need to set aside now for that particular claim based on the interest they would get over the payment period. 2.5% pa would add up to quite a lot over say 15-20yrs. That rate has been changed to -0.75% pa for some reason so the reserves insurers need to set aside are now much higher. So they need more premium...
Ogden rules which apply to personal injury payments have changed - where there is a lifetime care amount paid as a lump sum insurers could use 2.5% as a discount rate to get effectively a net present value for the lump sum, or I guess if not paying as a lump sum the amount they need to set aside now for that particular claim based on the interest they would get over the payment period. 2.5% pa would add up to quite a lot over say 15-20yrs. That rate has been changed to -0.75% pa for some reason so the reserves insurers need to set aside are now much higher. So they need more premium...