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Why you need to be considering excess layers

At a glance

  • On 20 March 2017, the Lord Chancellor cut 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
  • We have produced a guide that looks at 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.

The current discount rate was implemented on 20 March 2017 by the then Lord Chancellor, Liz, Truss, who changed the original discount rate from 2.5% to -0.75%.

Whilst on 7 September 2017 the Lord Chancellor and Justice Secretary, David Lidington announced measures to change the way the discount rate is calculated. The proposal will have to be drawn up and approved by Parliament, so it is currently unclear when this will be implemented. However, if the new system were in force today the rate might be in the region of 0% to 1%.The current discount rate of -0.75% applies to all claims settled on or after 20 March 2017 regardless of when the loss occurred. It has therefore had a significant impact on the cost of claims and that has needed to be reflected in future casualty and motor premiums.

Our helpful guide provides examples of real Zurich claims that illustrate how this change has impacted the value of the claim.

To discuss any aspect of this further, speak to your usual Zurich contact.

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