Expert Commentary on Personal Injury Claims Discount Rate Drop
News, Lawyer Monthly – March 2017
Insurance / Legal / Corporate
Following on from last week’s news that the Lord Chancellor announced a reduction to the discount rate for personal injury claims from 2.5% to minus 0.75% – a decision that will have profound consequences in the compensation industry, where discount rates are required – Lawyer Monthly received expert commentary from Amanda Fyffe, Director at RGL Forensics.
As posted in Lawyer Monthly on 8 March 2017
The discount rate has remained unchanged at 2.5% for the last 16 years and was set according to the average return on Index Linked Gilt Securities (which are linked to the RPI). However, since 2012 the discount rate has been under review and two consultations have taken place. The consultations were initiated to review (a) whether ILGS should continue to be the benchmark for setting the discount rate and (b) whether the assumption that claimants adopt a risk adverse stance as investors is still appropriate. The consultations followed the Helmot v Simon case in Guernsey where it was decided on appeal in 2012 that a discount rate of minus 1.5% earnings-related losses was appropriate. While the Courts of England and Wales were not bound by this decision, it started much debate that the 2.5% discount rate did not appropriately reflect today’s economic conditions and that claimants were being undercompensated as a result.
Read the rest of the article here at Lawyer Monthly.