Insurance Update - Discount Rate Revised
The hotly debated discount rate has been revised. The Lord Chancellor (David Gauke) has today announced a change setting the Discount Rate at minus 0.25%.
By way of recap those affected by this news will remember that in February 2017 the Lord Chancellor (Liz Truss) issued a statement that, as of 20 March 2017, the discount rate would change from 2.5% to minus 0.75%. In March 2017 the Scottish Ministers made an order confirming that Scotland would adopt this new discount rate with the change coming into effect on 28 March 2017.
For claimants, there may be a sense of disappointment having championed a change for so long to see that change reduced. However, for insurers and compensators, there is also likely to be some disappointment with many expecting a greater change than what was delivered in today’s announcement.
For those who are advancing a claim for compensation following injury and those compensating for that injury, the discount rate plays an important role in calculating the level of compensation. The purpose of the discount rate is to adjust the figure awarded to the injured person to reflect the interest and return they can expect to earn by investing and managing the compensation. The intention is to put the claimant in the financial position they would have been in had they not been injured.
Scottish Announcement Imminent
Part of the Damages (Investments Returns and Periodical Payments) (Scotland) Act 2019 came into force on 1 July 2019. The sections already in force set out timescales for review of the discount rate for Scotland every 5 years. The first review is already underway.
In view of today’s news watch this space for a Scottish announcement.
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