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Claimant and defendant lawyers were at loggerheads yesterday over a call from MPs for the personal injury discount rate to be reviewed and reset every three years.
Insurance companies and their law firms have been lobbying the government to backtrack on a controversial decision in February to slash the rate from 2.5 per cent to minus 0.75 per cent.
Liz Truss made the decision while she was lord chancellor because the rate had been unchanged since 2001, when interest rates were much higher for investors.
The discount rate is designed to reflect the amount that damages in severe personal injury or clinical negligence cases should be reduced to take account of the fact that the claimant will be able to invest the lump sum and derive interest.
Insurance lawyers have been lobbying for a re-evaluation and an increase in the rate.
Yesterday, a report from the House of Commons justice committee called for a law requiring the rate to be reviewed and reset at least every three years after the lord chancellor has consulted with an expert panel and Treasury officials.
Brett Dixon, president of the Association of Personal Injury Lawyers, called on the government to gather evidence about the impact of the proposal on injured people before changing the law.
“It must not be pushed into baseless reform by the vested interests of the insurance industry when the welfare of catastrophically injured people and their families is at stake,” he said.
However, lawyers for insurance companies welcomed an element of the committee’s report. David Johnson, a member of the Forum of Insurance Lawyers and a partner at the law firm Weightmans, said: “There is some good news in that the lord chancellor is encouraged to make a provision for him and his predecessors to publicise their reasons for arriving at a particular rate when reviewing the discount rate in the future, in particular where he/she deviates from the advice of the expert panel advising him. This will bring the transparency wanted within the industry.”
Mark Burton, a partner at the insurance company law firm Kennedys in London, claimed that the Ministry of Justice’s own consultation paper “showed that the current rate of minus 0.75 per cent overcompensates and is based on unrealistic methodology”.
He added that the unprecedented low rate “will therefore be a source of considerable frustration to compensators that the reform process looks set to drag on for a long while and be prolonged further by the committee’s intervention, especially as relevant evidence was submitted fairly recently for the consultation phase and we now appear to risk starting over again”.