New research suggests claimant personal injury solicitors are resigned to Discount Rate change
August 14, 2017
Claimant personal injury solicitors are resigned to the discount rate moving back up as a result of the Government’s latest consultation – with the majority believing it will be adjusted to between 1 and 1.5%.
New research commissioned by Bill Braithwaite QC from Exchange Chambers shows that just 10% of claimant personal injury solicitors expect the rate to stay at minus 0.75%, with 65% believing it will be adjusted to between 1 and 1.5%. 16% predict it will change to 0%.
Commenting on the findings, Bill Braithwaite QC said:
“Claimant personal injury solicitors are pragmatic. Under pressure from the powerful insurance lobby, they believe the Government will backtrack on its decision earlier this year.”
Bill Braithwaite believes a return to the old Discount Rate of 2.5% is “unthinkable and simply cannot happen” – a view echoed by all claimant personal injury solicitors.
“Claimants should not be expected to run investment risks with money which a Judge has declared is essential to their future health and well-being – yet this will be the reality of their situation if the government moves the discount rate back up.”
In another poll, conducted by BLM, UK claims managers indicated they wanted an increase in the discount rate to between 0-1%.
In a survey carried out as part of a webinar hosted by the defendant law firm, nearly two thirds of claims managers and insurers said that the discount rate would, and should settle somewhere at that level.
Three in ten would opt for an increase to 1-2% instead, while only 1.6% of those polled believed the rate would settle at the previous level of more than 2%.
Meanwhile, a number of insurers have posted an increase in first-half profits, shrugging off the discount rate change affecting personal injury compensation payments.
In the first half of 2017, Aviva grew operating profit by 11% to £1.46bn and pushed up its interim dividend 13%, despite reporting a £475m hit from March’s change in the discount rate. Operating profit from UK motor insurance increased 9% to £580m. The company said motor growth had been driven by ‘significant’ rate increases ’to match increased claims inflation as a consequence of the change in Ogden [discount] rate’. At AXA, meanwhile, income from personal motor insurance grew 8%, with underlying profits up 4%.
Claimant solicitors argue that a clutch of bullish trading figures posted by insurers suggests there is no need to reverse the discount rate change, a U-turn for which the insurance lobby has lobbied hard. The result of a government review of the change was expected in early August, but the Ministry of Justice now says it will be announced in ‘due course’.
Bill is a member of the personal injury department.