ABI 'Scrooges' launch legal challenge over discount rate review
Insurers call for â€˜open dialogue' amid â€˜reckless and â€˜wrong' consultation process
In a move described by claimant lawyers as 'worthy of Scrooge himself', the Association of British Insurers has launched a legal challenge to the Lord Chancellor's decision to review the discount rate for personal injury damages.
The Lord Chancellor announced on 7 December that a review of the discount rate, which currently stands at 2.5 per cent, would be complete by 31 January 2017. Calculations by APIL put the correct rate at between -0.5 per cent and -1.0 per cent, based on gilt markets as of 31 October 2016.
In her statement via RNS Liz Truss said any change could have 'profound financial consequences'.
The ABI has now called on the government to complete its consultation and change the methodology before proceeding with any changes. Without doing so the review will be flawed and have a fundamental misunderstanding of how people invest their compensation, the ABI said.
The director general of the ABI, Huw Evans, said it was vital that claimants get the compensation they are entitled to but 'based on a formula that reflects how they are likely to invest it'.
'The discount rate has a significant impact on the amounts paid out by both insurers and public sector bodies like the NHS. This calculation must therefore reflect the type of long-term investment behaviour we know claimants actually use,' he said.
'Despite two public consultations over three years ago and convening an expert panel, the Ministry of Justice has not yet shared any findings. Instead they are now trying to rush out a new rate for the first time in 15 years at a time of great uncertainty in the investment markets.
'To proceed in these circumstances is reckless and wrong. Insurers are open to a proper dialogue on how to reform the system but this is not the way to do it.'
The ABI also criticised the lack of transparency by the government, highlighting how the Lord Chancellor has provided no statement to parliament and that there is still no record of her statement on the MoJ's website.
Lawyers have branded the ABI's legal action as an attack on catastrophically injured people's compensation and 'worthy of Scrooge himself'. APIL's president Neil Sugarman said: 'The ABI is literally saying that it does not want to give catastrophically injured people the full support and funding they need, deserve, and to which they are entitled.'
The managing partner of GLP Solicitors characterised the ABI's challenge was a stall tactic designed to allow the insurance industry time 'to squeeze whatever it can from injured people for as long as possible'.
'To suggest that the Lord Chancellor has not been thorough in the review is beyond ludicrous,' added Sugarman. 'It has taken three years, two major public consultations, a hefty research paper, and a panel of specially selected experts to make this decision and the only right decision is for the rate to be substantially reduced.'
John van der Luit-Drummond is deputy editor of Solicitors Journal