News article published on: 15th July 2019
David Gauke has announced that today he will lay a Statutory Instrument in Parliament to change the discount rate applicable to personal injury lump sum compensation payments, to minus 0.25%
Ben Posford, Head of the Catastrophic Injury Department at London law firm Osbornes Law, says: “David Gauke is to be congratulated for resisting pressure from the insurance lobby to set a higher rate than this, which would simply have increased insurers’ profits at the expense of badly injured people.
“Investing damages that are needed to provide for an injured person is difficult at the best of times, and given the state of interest rates – which are likely to fall further in the event of a no-deal Brexit in particular – there was no justification for raising the discount rate any higher.”
Mr Posford also points out that enthusiasm for more use of PPOs by insurers needs to be tempered by the risk presented by a no-deal Brexit: “If an insurer based outside of the UK – as several leading names are – fails, then there is a question mark over whether the Financial Services Compensation Scheme will cover the PPO payments the insurer has committed to, leaving severely injured people penniless.”
The change to the new rate will take effect from 5 August.