NULL Personal Injury Discount Rate one price or multiple? – Clyde & Co – Legal News Organization
Personal Injury Discount Rate one price or multiple? - Clyde & Co

Personal Injury Discount Rate one price or multiple? – Clyde & Co

The 3rd of November, The Ministry of Justice (MoJ) announced that it would launch an “call for evidence” regarding the advantages and disadvantages of multiple discount rates used to determine the future loss in serious personal injury cases in England and Wales.

Even though the MoJ is not indicating an intention to move away of a single discount rate, it’s plausible to suppose that its analysis of data it collects from this study will influence the government’s thinking ahead of the next review that is formalized of the current rate, which, according to the Civil Liability Act (CLA) 2018, is required to begin in the summer of 2024.

MoJ organizes three roundtable discussions regarding this issue toward the end of this month. Each includes around 25 experts from industry. There is a good chance that MoJ releases documents that will help guide the discussions, and also provide the opportunity to submit more formal submissions to be sent.

At present there has been a single discount rate that was in use to England & Wales at common law. It was later extended in the Damages Act 1996 and the CLA 2018. However, it is important to note that the provisions in the CLA permit two or more rates. This does not mean that dual rates should be more expensive or less than the single rate currently in place The exact financial implications of splitting rates will depend on the way of division and the specific levels of each split rate.

In the initial rate-setting exercise in the Act in the year 2019 The Government Actuary provided outline analysis of the methods that could be employed if dual rates were to be introduced. The Lord Chancellor of the time at the time ruled that there wasn’t enough solid proof to push those plans forward , and he pledged to continue discussion. This new “call for evidence’ three years later seems to fulfill the pledge.

If there is no evidence without any material, it can be hard to form opinions. Yet, a comprehensive analysis of the questions raised require drawing not only on the experience of claim experts, as well as from the expertise regarding pricing and reserve for casualty and motor lines. These general points appear to be among the most important issues to be considered when response to MoJ.

  • Effects of split rate splits in valuing claims or making offers, as well as conducting settlement talks?
  • Methods of splitting rates depending on the period of loss Head of loss, period of loss, or another factors?
  • What split rates could be accommodated within Ogden Tables and in proprietary claim valuation software?
  • Which actuarial methods can be employed to ensure the accuracy of valuing claims?
  • Benefits and drawbacks that could be enacted for defendants, claimants, (re)insurers as well as other indemnifiers?
  • “Upstream” issues go beyond claims valuations. What is the effect the split rate has on price capital adequacy, reserving and re-insurance schemes?
  • The risks of gambling behaviors, that is secondary tactical arguments regarding the split rate that applies for a specific amount of loss or claim?

Clyde & Co is seeking representatives at all of the MoJ’s Round tables, and we will be planning our own briefing events (very likely to be remotely) within a short time to assist you in engaging with and address this vital solicitation to provide proof.