The Ministry of Justice has told lawyers and insurers they have a limited 6-week period to plead their case for how to set the discount rate applied to personal injury compensation settlements. The consultation was announced last week, much to the consternation of lawyers, only a month after the MoJ changed the discount rate from 2.5 per cent to minus 0.75 per cent.
Insurers have responded positively to the announcement of a consultation, having previously labelled the revised figure ‘absurdly low’; and will be heartened by the speed in producing a review that considers how and when the rate should be changed. Lawyers, on the other hand, will be less than impressed with what is seen as the MoJ’s undue haste in announcing a consultation. The previous system which clearly favoured insurers was left to stand unchallenged for 16 years; whereas the decision to consult on ‘reviewing’ the review looks set to be changed barely a month after its introduction.
Addressing these concerns, lord chancellor Liz Truss, offered some degree of reassurance to claimant lawyers, saying victims should be paid damages that compensate then ‘fully’. She added that ‘the idea is to put them in the same position that they would have been had they not been injured, to the greatest extent possible, and I remain absolutely committed to the principle of full compensation.’
However, the Ministry of Justices has previously gone on record saying that the review will not focus on the discount rate alone; but will have a much wider remit, and consider whether there is a better or fairer future framework for claimants and defendants. As part of this wider remit, the consultation will consider all the options for reform; including whether the rate should be set by an independent body in the future, whether more frequent and regular reviews would improve predictability and certainty for all parties and whether the current methodology is appropriate for the future.
Understandably the decision to call an early consultation was not greeted enthusiastically by lawyer groups. Stuart Henderson, managing PI partner at Irwin Mitchell, told the Law Society Gazette the rate should be set ‘to ensure compensation is adequate and not to satisfy shareholders’. However, insurers enthusiastically welcomed the early consultation, with Huw Evans, director general of the Association of British Insurers, saying the decision to call an early consultation was an important step in achieving a ‘fair, modern way’ to set the discount rate which works for claimants, consumers, businesses and taxpayers.