The Ministry of Justice has begun its long-awaited review of the personal injury discount rate—the crucial percentage that determines the amount of damages payable where claimants have serious injuries.
David Gauke MP, the lord chancellor, announced the immediate start of the review this week, in a statement to the London Stock Exchange. Under the terms of the Civil Liability Act 2018, the lord chancellor must determine whether to change or keep the existing rate within 140 days of the start of the review, by 5 August 2019.
The rate is used to assess the expected rate of return on investment that claimants with serious injuries can expect over their lifetime. Historically, the rate assumed a cautious claimant who invested in low-risk index-linked government stocks (ILGS).
In February 2017, Liz Truss MP, the then lord chancellor, controversially reduced the rate from 2.5% to -0.75% to take account of poorly performing ILGS.
The Medical Protection Society expressed fears that the cost of clinical negligence claims would become ‘unsustainable’ for the NHS. However, claimant lawyers said the rate had been set too high for 16 years, saving insurers huge amounts and under-compensating claimants. The government promised a speedy review.
Subsequent government research found that claimants tend to make riskier investments than assumed and suggested draft legislation to change the way the rate is set, proposing that an expert panel advise the lord chancellor.
Brett Dixon, president of the Association of Personal Injury Lawyers, said: ‘I hope the lord chancellor will make his decision based on the very real needs of people who suffer catastrophic, life-changing injuries through no fault of their own.
‘It is also important to remember that compensation for very serious injuries can sometimes be paid by instalments (periodical payment orders (PPOs)). The need to address barriers to that system is now urgent.’
Anthony Baker, Forum of Insurance Lawyers (FOIL) vice president, said the current rate was ‘unduly harsh on the NHS, public purse, motorists generally and insurers’.
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