The Association of British Insurers (ABI) has launched a legal challenge against a review of the personal injury discount rate. A decision following an earlier consultation on the possibility of lowering the rate is set to be announced before the end of January.
The discount rate is a reduction made to the payouts that people who make personal injury claims receive in compensation. When an individual claims compensation for a workplace injury, an injury received in a traffic accident that wasn’t their fault, or any other kind of accident compensation, then the money they are paid will be discounted according to the rate in order to account for the interest that the money is expected to earn. Currently, the rate is 2.5% and hasn’t been changed for some years, leading to criticisms and concerns that the rate is too high to properly reflect interest rates. The result of this, it is claimed, is that compensation recipients are unfairly penalised, with their payments docked by more than the amount that would really reflect interest earned. According to the Association of Personal Injury Lawyers (APIL), the correct rate would be somewhere on the -0.5-1.0% range.
A consultation on the rate was launched in light of these concerns back in 2012. It is now over four years since this consultation reached its conclusion, but so far not only has no change been made but no decision of any kind has materialised. This is now set to change, however, with a recent announcement that a decision would be released by 31st January 2017.
Now ABI has launched a legal challenge to the decision to bring the discount rate under review. They claim that the review in its current form is flawed and does not reflect the way that compensation payments are invested by recipients, and insist that the government should reform its methodology before making any changes to the current discount rate.
ABI Director General Huw Evans said: “The discount rate has a significant impact on the amounts paid out by both insurers and public sector bodies like the NHS. This calculation must therefore reflect the type of long-term investment behaviour we know claimants actually use.”
Legal professionals have criticised the decision to launch a legal challenge to the review. ABI has been accused of trying to maintain the current rate in order to reduce the amount that insurers have to pay out at the expense of injured claimants, or at least to delay changes for as long as possible. The challenge itself has been called an action “worthy of Scrooge himself.”
Neil Sugarman, president of APIL and managing partner at GLP Solicitors, accused ABI of trying to “squeeze whatever it can from injured people for as long as possible” by launching the challenge as a way to delay any move to a lower and more representative discount rate. Sugarman also claimed that ABI was “literally saying that it does not want to give catastrophically injured people the full support and funding they need, deserve, and to which they are entitled.”