New discount rate to be applied to personal injury and clinical negligence damages

Post by: Brenda Gilligan 26/07/2019 0 comments 863 views

The Lord Chancellor, David Gauke MP, has announced the new discount rate to be applied to personal injury and clinical negligence damages.

Lawyers for both Claimants and Defendants have been waiting for this news for some time and it was announced rather earlier than the expected date of 5 August 2019.

The discount rate is the interest rate a Court must consider a Claimant will invest their lump sum for damages for future losses at. David Gauke said that Claimants must be treated as “low risk” investors as they will be financially dependent on that lump sum, often for many years or even life, so will not want to speculate with it.

The new discount rate is to be -0.25% as against the old rate of -0.75%, set in 2017, providing good news for Claimants, whilst the Law Gazette describes insurers as being “furious” over the minor adjustment.

The new rate was widely believed to come in at least 1%. Claimant lawyers reacted by congratulating the Government for:

“resisting pressure from the insurance lobby to set a higher rate, which would have increased insurers profits at the expense of badly injured people” (Ben Posford, Osbornes Law in London).

Martin Milliner, from insurers LV commented that he:

“believe Claimants would remain over-compensated, thus undermining the common law principle of 100% compensation”.

This reaction was predictable, because the higher the discount rate, the less the insurers have to pay in terms of actual compensation to those injured by the negligence of others, thus increasing the amount available to shareholders and in profits for insurers. They have conveniently forgotten that for 12 years, the discount rate was set at 2.5%, thus could be said to have under-compensated Claimants for years.

The modest adjustment comes as a great relief for Claimants.

It may also now allow settlement of claims which have been held up pending the announcement as insurers were waiting to see the new rate, which can make a huge difference in the amount of damages actually paid, especially in high value claims for the most seriously injured clients who have the greatest needs.

The rate will be reviewed within a 5- year period “to ensure it remains fit for purpose in the future”, said Mr Gauke. That purpose being of course, to secure the financial future of injured people as far as the compensation system can.

For further information please contact Brenda or a member of the Personal Injury/Medical Negligence team.


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