The Lord Chancellor recently announced the conclusion of the Personal Injury Discount Rate (PIDR) review under the Civil Liability Act 2018. From 5 August 2019, the discount rate will increase from -0.75% to -0.25%.
Whilst a significant increase in the rate has been delivered, the revised rate falls somewhat short of expectations. Analysts had expected that the likely outcome was to be in the range of between 0% and 1%.
The new rate is based upon the premise that claimants are to be treated as ‘low risk’ investors and financially dependent on their damages for long periods of time. With the next PIDR review taking place in five years’ time, insurers are accepting that a negative rate will be the new normal for the immediate future.
Through the application of the revised rate, there will be a fall in the level of damages on high value claims, however these damages will continue to be uplifted. This is based upon the assumption that a claimant will choose to invest their damages in a way that means they will lose money.
The reality is very different.
The reluctance of claimants to accept periodical payment orders is unlikely to change whilst lump sum settlements remain so attractive.
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