Ogden rate 'has cost Allianz UK £80m' – Dye

The Ogden rate cut has cost Allianz’s UK general insurance business a total of £80m so far, according to chief executive Jon Dye.

Dye announced that the company’s 2017 operating profit would have been £22m higher, but for the cut to the personal injury discount rate announced in February last year.

That comes on top of the £58.3m provision the company made in its 2016 results to cover additional compensation costs.

Earlier, Allianz UK reported higher profits and an improvement to its core ratios for the year to December.

The UK operations of the German insurer saw operating profit for the year rise to £121.3m from £96.2m in 2016. Gross written premium rose to £2.186bn in 2017 from £2.141bn the previous year, and the combined operating ratio improved to 97.8% from 99.2%.

“The Ogden problem hasn’t gone away,” Dye declared.

“Providing seriously injured people with a fair and appropriate level of compensation is the right thing to do,” he said.

But he added that the cut in the Ogden rate from 2.5% to minus 0.75% meant that insurers are now “over-compensating” claimants who are unlikely to invest their lump sum compensation in the kind of ultra-safe investments with negative returns that the new rate is meant to reflect.

“The sharp increase in the cost of settling personal injury claims is contributing significantly to rising premiums for customers,” Dye said.

He welcomed the government’s intention to increase the Ogden rate to between 0% and 1%.

“The implementation of a framework that delivers a fair outcome and brings greater clarity and certainty to the market is urgently needed.”