Proposed changes would represent a ‘savings windfall’ for insurers, says association president

By Jon Guy

The Association of Personal Injury Lawyers (APIL) has this week (11 March 2023) submitted its views on the Ministry of Justice’s (MoJ) proposals for a dual or multiple personal injury discount rate.

Unsurprisingly, the association is not happy.

Jon Guy

Jon Guy

At the beginning of the year (17 January 2023), the MoJ launched an open consultation on proposed amendments to the personal injury discount rate (PIDR), which were aimed at more accurately reflecting the size and duration of damages awarded.

The PIDR is a rating applied to the way a lump sum compensation is paid for significant personal injury cases, but critics say the historic single discount rate can be unfair for claimants whose awards only last a short time, as they are exposed to more investment risk.

However, APIL president John McQuater has warned that if the MoJ’s proposed system is adopted it will place additional pressure on catastrophically injured people.

The proposed new system would deliver a windfall to insurers, added the association.

Forced risks

“Injured people are already forced to take risks when investing their compensation to try to make it meet their needs for the rest of their lives,” said McQuater.

“The idea of a dual discount rate is founded on the assumption that the longer an investor is prepared to invest their money, the more risk they can take and consequently the better returns they can expect.”

“But injured people are not ordinary investors – they are inherently risk averse, something which the MoJ repeatedly fails to recognise,” he continued.

“We can find no evidence that injured people seek to take risks or that a dual or multiple discount rate will make the situation any better for victims of negligence.

“In fact, a higher rate for people with longer life expectancies will pile additional pressure on them to take greater risks to make their compensation stretch to meet their needs.

“And, of course, it would hand insurers a savings windfall.”

APIL said that – by the Government’s own admission – a third of claimants who have settled their claims under the current single rate would not be able to recoup 100 per cent of their financial losses.

“The current single discount rate is not perfect, but a dual or multiple rate will exacerbate the chance of under compensation even further,” McQuater added.

“More could be done to increase the use of periodical payment orders (PPOs), which remove the substantial risks faced by injured people who must invest their compensation over time, including fluctuations in the market.”

Indeed, a survey of APIL members in 2020 revealed that 88% of members said they found it difficult to obtain a PPO from an insurer.

“This is despite more than half of seriously injured victims of negligence preferring to receive some or all of their compensation in the form of a PPO, according to a YouGov poll,” explained McQuater.

Lawyers for insurers have been equally adamant that change needs to come, with warnings that the current system is open for abuse and that the new system will need careful monitoring to guard against fraudulent claims.