Announcement Of New Discount Rate For Personal Injury Claims

The Lord Chancellor has announced that the personal injury discount rate will be reset at -0.25%, with effect from 5 August 2019.

This long-awaited announcement is something of a surprise as the rate was expected to be adjusted to somewhere between 0% and 1%. The announcement will likely be met with relief from claimant practitioners and criticism from insurers.

The discount rate has been set at -0.75% since the Government reduced it from 2.5% in February 2017. At that time, insurers were furious with the change to a negative rate and warned that the resultant increase in damages would have an adverse knock-on effect on insurance premiums.

The discount rate affects the multipliers which are used to calculate compensation for ongoing future losses to take into account interest and inflation. If the rate is too high, then the risk is an injured person will not receive enough compensation to take into account inflation but, if the rate is too low, the injured person could be over compensated. The rate is set with these two competing elements in mind.

Although the -0.25% rate will reduce the multipliers for future losses, there is no doubt that this review is a victory for claimants. The Justice Secretary, David Gauke, commented:

“It is vital victims of life-changing injuries receive the correct compensation – I am certain this is the most balanced and fair approach following an extensive consultation. It is also right that the rate is informed by experts and reviewed on a regular basis to make sure this important calculation is accurate every time”.

The government will review the personal injury discount rate within 5 years of this review to ensure that it remains fit for purpose in the future. Future reviews will be conducted using an expert panel specifically established for the review.

Further information and legal advice

If you would like to discuss the issues raised in this article in more detail or if you have any queries, please contact a member of our Corporate Claims or Medical Negligence Team.