Claimant lawyers resigned to discount rate change
Rate expected to move to between 1 and 1.5 per cent, a survey of solicitors finds
Claimant personal injury lawyers are reconciled with an inevitable upward increase to the discount rate as a result of the government's consultation, but argue a return to the previous rate would be 'unthinkable'.
New research commissioned by Exchange Chambers barrister Bill Braithwaite QC shows that only one in ten claimant solicitors expect the rate to stay at -0.75 per cent, with two-thirds believing it will be adjusted to between 1 and 1.5 per cent. Almost one in five predict it will change to 0 per cent.
Claimant solicitors do not expect the change to happen any time soon, however, with eight in ten practitioners believing the government will release the findings of its latest consultation during 2018.
'Claimant personal injury solicitors are pragmatic. Under pressure from the powerful insurance lobby, they believe the government will roll over and backtrack on its decision earlier this year,' commented Braithwaite. 'An adjustment to between 1 and 1.5 per cent would be a compromise, face-saving position for the government to adopt '“ but it would be a backward step for justice.'
The silk believes a return to the old discount rate of 2.5 per cent is 'unthinkable and simply cannot happen' '“ a view echoed by claimant solicitors.
Commenting on the findings, Yasmin Ameer of Nockolds Solicitors said: 'I would be disappointed, but not surprised, if the government moves the discount rate back up.
'It is worth remembering that, if their money runs out, the injured person suffers horrendously. It is also worth remembering that the injury was caused by the carelessness or recklessness of a person or organisation which has paid insurance premiums to cover precisely this type of expense,' she added.
'Every penny of compensation is allocated to a specific need in the future. Inadequate compensation will mean that therapy and support stop, and the claimant and his or her family can no longer afford to live in the specially adapted home. This is not scaremongering '“ it is happening here and now. The discount rate has been far too low, for far too long.'
The motor insurance market suffered combined losses of £3.5bn following the cut to the discount rate, according to a recent report from EY. Approximately £2.4bn of losses have been disclosed publicly to date, following the then Lord Chancellor's 27 February decision.
However, Braithwaite has little sympathy for the insurance industry. 'The new rate came into effect on 20 March 2017. Prior to this, the discount rate was last set in 2001. The revision was long overdue '“ a fact the insurance industry is well aware of and has had years to prepare and reserve for.'
The silk's research indicates that less than one in three claimant solicitors have settled future loss personal injury claims since the discount rate changed to -0.75% per cent, a fact that Braithwaite views as a cause for concern: 'Are insurers delaying settlement meetings in anticipation of the discount rate moving upwards when the government acts on the second consultation?'
Lawyers are achieving successes under the new rate though, with 80 per cent of claims proceeding under the new rate. 'If claims are actually settling at -0.75 per cent it suggests a high proportion of claimant solicitors are securing the best possible settlement for their clients,' said Braithwaite. 'This figure challenges the anecdotal information cited by insurers, that the industry is using 1 per cent.'
John van der Luit-Drummond is deputy editor of Solicitors Journal
