January 30, 2017

Reports in oddly coloured newspaper the Financial Ties reports that shares in insurance companies haves slumped on fears that the forthcoming announcement of the findings of a review into something called the Ogden Rate will force insurers to pay MORE money in compensation to those claiming on insurance policies protecting them from injury or ill-health.

‘The What Rate?’, you may bellow moronically in abject and pitiful ignorance. Allow us to explain: Nathaniel Ogden was a Nineteenth Century naturalist, physician, tobacco baron and parliamentarian who pioneered the concept of inventing arbitrary formulas with which to alter things from time to time.

In the field of medical endoscopy, for instance, he was responsible for the now defunct Ogden’s Probe Randomisation Asymmetricality Hypothecator. In the sporting world, he invented a formula for varying the size of cricket wickets from over to over (also now fallen into disuse, sadly), and in the field of catering and hospitality he vainly championed a logarithmic variance engine designed for the periodic adjustment of measures for wines, ales and spirits.

His most enduring legacy, however was the methodology we know and love simply as the Ogden Formula, still in use to this very day as a means of assigning the Ogden Rate (see above), which in turn is used to calculate whether insurance claimants should be paid a bit more or a bit less than they would otherwise have been paid.

In a stroke of genius (occurring shortly before a stroke of a rather more sinister kind finally and tragically curtailed the output of his endlessly prolific brain) Old Nathaniel hit upon the idea of linking his formula to the current rate of interest.

Basically it works like this: if the Ogden rate is set at, say, 5% it means that insurers can pretend they’re paying injured persons 5% more than they really are because these persons, or whoever is looking after them if they’re not up to it themselves, can invest the money at something vaguely approximating to 5% and therefore they don’t actually need as much money as they would otherwise.

The precise way in which the Ogden Formula converts interest rates into Ogden Rates remains shrouded in mystery, but those who’ve experienced it first hand have long maintained that the simple act of running the Ogden calculations can be both wildly entertaining and spiritually enlightening, although Bankstone News wouldn’t know about that.

Perhaps for this reason, at the height of its popularity, the Ogden Rate would be calculated as frequently as three or four times a week, and, on one famous occasion in 1873, six times in a single afternoon! Nowadays, sadly, the Ogden Formula spends most of its time in a dusty old cupboard somewhere in the damp and asbestos infested bowels of the Houses of Parliament.

In 2013, having remained undisturbed for the past 13 years, the formula was fetched up, dusted down and set before the long-suffering but uncomplaining staff of the Lord Chancellor’s office, who’ve spent the past three years trying to fathom exactly how to make the damned thing work. The word is, however, that current Lady Chancellor Lizzy Truss will soon be announcing a freshly generated Ogden rate, which could potentially see the rate reduced from the current 2.5% to a mere 1 or 1.5%.

This would be bad for insurers and bad for the decent ordinary policyholders who have to reimburse them for anything that stops them paying as much as they’d like to their shareholders. It would mean, for example, that motor insurance policyholders would have to pay between 1 and 1.5% more for their car insurance because personal injury claimants would get paid more compensation.

In an attempt to forestall this clearly undesirable outcome, the Association of Brutish Insurers launched an unsuccessful legal challenge asking to have the formula returned to its resting place for a bit while we wait to see what happens next over the coming years. “The Lord Chancellor seems to want to rush out a new discount rate,” moaned Jimmy “Duellin” Dalton, at what he described as “a time of significant global financial uncertainty.”

Failed legal challenge notwithstanding, many in the industry continue to argue that the formula should be put back where it came from until further notice. In private some have even hinted at the enticing prospect that it should stay there unless and until interest rates hit 2% at which point it should probably be whacked up a bit to create a ‘margin of error’.

Amen to that, says Bankstone News. And so, no doubt, would every decent honest motor insurance policyholder who’s in no hurry to pay more for their car insurance just so that some sick person or accident victim has to work a bit less hard to secure an attractive return on the vast sums of cash they’ll be investing following whatever bumper pay-out their crafty legal representatives finagle on their behalf.

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