The Ogden Discount Rate - what's going on?

The government has changed the Personal Injury Discount Rate aka the Ogden Discount Rate, but what can you expect?

This year there have been a number of decisions made in Parliament that will affect the car insurance industry–in particular the change to the Ogden Discount Rate. But if you’re still in the dark about what the Personal Injury Discount Rate is and how it might affect you, we aim to explain it all here.

What is the Personal Injury Discount Rate?

Any lump sum awarded to you used to be discounted because if you invested the money, you would receive a sizable return on investment.  

The 2.5% discount is what we call the Personal Injury Discount Rate.

The higher the Personal Injury Discount Rate the lower the initial lump sum.

But why has the government decided to change the Personal Injury Discount Rate from 2.5% to -0.75%?

There are a lot of reasons for this happening, but one reason in particular is because interest rates are low.

When interest rates are low you can’t make a good return on an investment. As a result the lump sum needs to be bigger upfront to cover your injuries so you don’t run out of money.

Will the government’s change to the Personal Injury Discount Rate affect what I pay for my car insurance?

The simple answer is yes, it will. 

Severe personal injuries from car accidents are fortunately rare, but they do have the biggest impact. When they happen we will need to pay out more money than we used to, to cover the cost of care for those affected.  

To show you how the change to the Personal Injury Discount Rate has affected the cost of a personal injury claim here is an example:

A 40 year old man has suffered life-changing paralysis from a car accident. He worked as a security guard. Due to his accident he may have to move into a bungalow and need a carer.

The care costs the insurer pays

2.5% Ogden Discount Rate applied

-0.75% Ogden Discount Rate applied




From the table you can see the care bill has almost doubled when we apply the new rate of -0.75%. People injured in road accidents can of course be any age, but costs are significantly higher when the person injured is particularly young.

So that there is enough money put aside to cover any future claims like this, we will unfortunately need to put up the price of car insurance policies. 

What can you expect from esure?

If you’re with esure and your insurance is up for renewal, you’ll receive a letter with your new policy pricing. 

We aim to be upfront about why your car insurance policy has changed price, and are committed to ensuring you are still getting a fair deal for the level of cover you have.