Dual discount rate 'piles pressure' on seriously injured – APIL

Claimant advocates have warned that proposals for different discount rates applied to compensation payments will put extra pressure onto victims already dealing with catastrophic injuries.

The Ministry of Justice is exploring the idea of applying a dual discount rate for damages payments depending on how long the effect of injuries will last.

Opening a consultation on the issue in January, justice minister Lord Bellamy KC said the present system of a single discount rate can result in unfairness.

But the Association of Personal Injury Lawyers said that a dual discount rate would increase pressure on those with the most serious injuries to take risks when investing their compensation to make it meet their needs for the rest of their lives.

John McQuater, APIL president, said the government is working from the false assumption that victims will be prepared to invest in greater risks to secure better returns. ‘Injured people are not ordinary investors. They are inherently risk averse, something which the MoJ repeatedly fails to recognise,’ said McQuater.

‘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.’

McQuater said the effect of the change would be to hand insurers a windfall and – by the government’s own admission – to exacerbate the chance of under-compensation.

John McQuater 2022

He suggested that more could be done to increase the use of periodical payments to remove the risks caused by market fluctuations.

McQuater cited a survey of APIL members in which 88% said they found it difficult to obtain a periodical payments order 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.’

The government is due to review the current -0.25% discount rate next year but is able to introduce different rates sooner according to the Damages Act.

The MoJ’s call for evidence warns of the potential to increase confusion, complexity and litigation through a dual rate, as well as the knock-on effect of rising costs and delays at all stages of the process. A single rate, it is suggested, has the benefits of greater simplicity and transparency.

But basing the rates on duration of injuries could make outcomes fairer by ensuring that shorter term claimants benefit from a pro rata larger sum, it is also argued. Ministers would like the discount rate to be more flexible and believe that the single rate potentially over-compensates some claimants. The stepped rate offers a ‘more logical process’ for claimants and defendants to follow, the consultation adds.


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