Why you need to be considering Excess Layer Insurance.
On 27th February 2017, the Lord Chancellor announced a cut in the discount rate, moving it from +2.5% to -0.75%.
The discount rate reflects the level of investment return that a claimant can expect to achieve by investing their award. Below are some anonymised examples of real Zurich claims that illustrate how this change has impacted the value of the claim.
Claimants should absolutely get a fair settlement of claims following an injury, but the decision to change the discount rate so dramatically has big implications in terms of the cost and affordability of insurance. This change will apply to all claims settled on or after 20 March 2017 regardless of when the loss occurred.
It will therefore have a significant impact on the cost of future settled claims and that will need to be reflected in future casualty and motor premiums.
If you feel you need to increase your liability please ask us for a quotation.
Claim examples
Claim 1
Motor – Severe Head Injury, reserve from £13m to £28.5m
Cause of loss – 7 year old child travelling as a rear seat passenger when insured’s van collided with the rear of the claimant’s car resulting in severe head injury to the child.
Injury – Large compound skull fracture resulting in severe cognitive impairment and said to have the mental age of a 3 year old for the remainder of their life. Walks using a frame, albeit uncoordinated. Will require 24 hour life-long care.
Claim 2
Employers Liability – Amputated foot, reserve increased from £2.3m to £3.5m
Cause of loss – Claimant was loading a press with 6 meter long aluminium logs which arrive in bundles. After cutting the banding, instead of rolling down the table, one log rolled back off the table and landed on claimant’s foot.
Injury – Initially crush fractures to toes of right foot and subsequent operations to amputate great toe, then mid foot and finally whole foot.
Claim 3
Employers Liability – reserve increased from £550,000 to £765,000
Cause of loss – Impact from a fork lift truck.
Injury – Severe fracture to tibia and fibula right leg to warehouse operative.
Comment: Reserve increased by £215,000 which is small compared to some of the example here but still increases the original claim by 40%.
Claim 4
Employers Liability – reserve from £5.3m to £10.6m
Cause of loss – Fall from height of 8m.
Injury – Severe brain injury, claimant remains in hospital following accident over 12 months ago and still unable to speak.
Comment: Reserve increased by £5.3m due to change in the discount rate, future cost of care making up a significant percentage of the increase.
Claim 5
Public Liability – reserve increased from £6.8m to £10.7m
Cause of loss – Cyclist hit a pot hole causing him to fall.
Injury – Traumatic brain injury.
Comment: Reserve increased by £4m following discount rate change, future care costs increased from £3.8m to £6.8m.
Claim 6
Public Liability – reserve increased from £4.6m to £9.6m
Cause of loss – Claimant fell from a window from the first floor of a house.
Injury – Severe head injury and unable to cope with many day-to-day tasks and vulnerable.
Comment: Increased by £5m due to discount rate change.
