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The new Personal Injury Discount Rate

The Personal Injury Discount Rate (PIDR) is used to work out the size of the lump sum that victims receive from insurers. The current rate is set at -0.75% which has been in place since the Government changed it from 2.5% in February 2017.

The first review of the PIDR started on 19 March 2019 and was set to last for 140 days. It was suspected that the rate would be changed to 1% thereafter.

The Lord Chancellor announced on 15 July 2019 that the PIDR will be changed to -0.25% which will no doubt come as disappointing news to insurers and other compensators. The new rate is due to come into force on 5 August 2019.

This has dealt a blow to insurers as the industry will now face higher compensation payments than had been anticipated after the review. The increase has fallen short of insurers’ expectations prompting warnings that premiums may increase as a result. In addition, costs for the National Health Service, which uses the same method to calculate payments for clinical negligence claims, will also be affected by the decision.

Simon Kayll, Chief Executive of the Medical Protection Society has stated that he “expect[s] that the cost of clinical negligence will remain very challenging for the public purse, the NHS, doctors and the wider economy,” he added, “We welcome the speed at which the Government has moved to reform the law on how the discount rate is set. The Government has however been much slower in introducing a long awaited and much needed strategy to address the rising cost of clinical negligence. Urgent and bold legal reforms are now desperately needed.”

The Government will review the rate within a five year period to ensure that it remains fit for purpose in the future. Future reviews will be conducted using an expert panel specifically established for the review. From a claims handling perspective, parties can at least now engage with more certainty during the next review cycle.

The Lord Chancellor has stated that “it is vital victims of life changing injuries receive the correct compensation – I am certain this is the most balanced and fair approach following an extensive consultation”.

Click here to read the Lord Chancellor’s statement of reasons.

For more information or to discuss this matter further, please get in touch.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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