Compensators should start preparing for a new personal injury discount rate as it will come into force in no more than eight months, according to law firm Kennedys.
The Civil Liability Act 2018 received royal assent yesterday. Under its provisions, the lord chancellor, David Gauke, must start a review of the discount rate within 90 days. He must then determine the rate within 140 days of the review commencing, meaning that the latest he can set the new rate is 7 August 2019.
The Ministry of Justice has already started preparing for the discount rate review by issuing a call for evidence on 6 December. It closes on 30 January 2019.
The discount rate is almost certain to change from the current -0.75% because the act alters the way in which it is calculated, according to Kennedys.
At present, the assumption is that claimants choose ‘very low’ risk investments for their damages. This will change to an assumption that they will select more risk than a very low level, but less risk than would ordinarily be accepted by a prudent and properly advised individual investor.
The lord chancellor must consult with both the government actuary and the Treasury as part of this process.
Deborah Newberry, head of corporate and public affairs at Kennedys, said of the discount rate changes: “Reform to the discount rate is to be welcomed and it will in future reflect a real-world approach to how claimants invest their damages. Compensators will in turn be able to plan their reserves in a more realistic manner.”
“We can expect a certain amount of tactical manoeuvring in the coming months ahead of a change in the rate, but at all times both claimant and defendant lawyers must bear in mind the importance of doing what is best for the client.”
“Given the call for evidence has already begun, we could see a new rate before August 2019.”
Dr Matthew Lee, director of professional services at the Medical Defence Union, welcomed passage of the legislation. He said: “The personal injury discount rate was drastically reduced by 3.25% in 2017, which has driven up the cost of clinical negligence claims dramatically. It has doubled and, in some cases, trebled high value claims making £37 million the NHS’s highest award to date. The act requires a change to the way the rate is set and should go some way to redressing the financial damage caused to the NHS and GP indemnity costs by the personal injury discount rate reduction.”
“The lord chancellor has 90 days to start the rate review and the determination must be made within 140 days after that. While