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Discount rate down, Damages up - An update

  • United Kingdom
  • Litigation and dispute management
  • Personal injury claims litigation


Since our bulletin regarding the forthcoming announcement from the Lord Chancellor, concerning potential changes to the discount rate (which can be found here) matters have progressed.

The Association of British Insurers launches legal challenge

The Association of British Insurers (ABI) has followed in the steps of the Association of Personal Injury Lawyers (APIL) and commenced judicial review proceedings.

APIL commenced proceedings in July 2014 to influence the Lord Chancellor to review the current discount rate and make changes. The government responded by saying that a decision on the rate will be announced at the end of January 2017.

The ABI are now seeking to challenge the decision to announce those changes.

The ABI say that the government has not completed all of the work required to reach a decision. The methodology for determining the discount rate needs to be changed to take into consideration how ‘real life people’ invest their money. Without carrying out this work, the resulting decision would be flawed. In addition, they say that the findings of any work that has been completed so far have not been published, in breach of Cabinet Office guidelines.

The ABI argue that there has been no indication of a change in the rate for 15 years and suddenly, in the face of judicial review proceedings brought by APIL, they are rushing through the process to reach a quick decision, at a time of real uncertainty in the investment markets.

APIL have responded to the ABI’s legal challenge by stating that the ABI are merely seeking to stall the decision announcement for their own advantage, keeping the rate as high as possible for as long as possible.

What is the likely effect of this legal challenge?

It is unclear at this early stage what effect the ABI’s challenge will have upon the Lord Chancellor’s announcement. It is very likely that it will cause more delay, which whilst causing frustration for APIL, should give compensators a bit more time to prepare for the changes ahead.

National Audit Office review of rising cost of clinical negligence claims

In the meantime, the National Audit Office has launched a probe into the rising cost of clinical negligence claims, in what the NHS Litigation Authority (NHSLA) has described as a “value for money study”.

As the NHSLA are the compensator most likely to suffer from a lower discount rate, the timing of this review seems to be more than mere coincidence.

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