On 15th July 2019, the Lord Chancellor announced that the new Personal Injury Discount Rate will be set at minus 0.25%, following a consultation process and as set out within the Civil Liability Act 2018.
The Discount Rate is a figure used to help calculate lump sum compensation payments for high value personal injury claims. It reflects the fact that someone getting a lump sum payment will typically invest it and will expect to get a return on it. The lower the rate, the higher the compensation awarded and the greater the cost to compensators, such as insurers and the NHS.
The Discount Rate was 2.5% for many years but was reduced to minus 0.75% in March 2017. The new rate of minus 0.25% will be effective for claims settled from 5th August 2019. It applies to England and Wales only; Scotland has the powers to set its own Rate.
ABI response
The new Discount Rate is a bad outcome for insurance customers and taxpayers that will add costs rather than save customers’ money. It will put further pressure on premiums.
We are deeply frustrated. It matters that this system works properly so accident victims get the right compensation and insurance premiums are affordable. The industry has spent two and a half years working with the Government, helping design and legislate for a more predictable and modern formula, only to have the Lord Chancellor override the recommendation of The Government Actuary’s Department without any prior warning. This sets a worrying precedent.
This will remain the lowest Discount Rate in the Western world, leaving England and Wales an international outlier at a time when we need to boost our attraction to international capital.