The new personal injury discount rate has been revealed after months of deliberations and has been welcomed by lawyers.
The rate – used to work out personal injury compensation settlements – was changed from -0.75 per cent to -0.25 per cent.
The announcement means personal injury clients will get slightly less from August 5, but the legal industry had feared the rate would be dramatically changed in the insurance industry’s favour.
Justice Secretary David Gauke said: “It is vital victims of life-changing injuries receive the correct compensation – I am certain this is the most balanced and fair approach following an extensive consultation.
“It is also right that the rate is informed by experts and reviewed on a regular basis to make sure this important calculation is accurate every time.”
The rate is currently set at -0.75%, which has been in place since the government changed it from 2.5% in February 2017. That decision prompted an outcry from the insurance industry, which said that the resulting increase in damages would have an immediate effect on premiums.
Since then the Ministry of Justice brought in the Civil Liability Act which required the lord chancellor to conduct a review of the rate. The government will review the rate again in five years.
Peter Todd, Partner at Hodge Jones & Allen leading on the firm’s work on the discount rate, said: “We are delighted that the interests and need of victims of serious injuries have been protected despite sustained pressure from the insurance industry to increase the discount rate significantly. It is only right and proper that some of the most vulnerable people in our society receive the funds they need to ensure their long-term care.
“Had the Government caved into pressure from the insurance lobby it would have increased corporate profits at the expense of fair compensation that so many victims of serious injury need. The Lord Chancellor is to be commended for his decision.”