Insurers are cancelling claims settlement meetings in the hope that the government reverses its shock decision to require lump-sum payments to be topped up, the Gazette has learned.
Justice secretary Liz Truss sprung a shock last week when she announced that the discount rate, which calculates deductions from compensation payments, would change from 2.5% to minus 0.75%.
Insurers immediately labelled the decision ‘crazy’ and within 24 hours a delegation of chief executives met chancellor Philip Hammond at Downing Street to lobby for a u-turn.
Claimant lawyers told the Gazette they fear insurers will now stall over settling claims while they wait and hope for a revised rate.
Stuart Henderson, managing partner of the personal injury department at Irwin Mitchell, said the prospect of further discussion will bring uncertainty for injured people and their families who want to bring their cases to a conclusion.
‘It is unfortunate that this new rate has been introduced together with a promise of an early government consultation around the approach to setting the rate. That has just created further uncertainty,’ Henderson said.
‘Already, we have seen defendants putting off meetings to settle cases in the hope they may find a way around the rate that has been set through the pending consultation or by other means.’
Truss said the new rate was the ‘only legally acceptable’ level she could set. Insurers have said they will target a change in the law governing how the rate is set, possibly through the Prison and Courts Bill laid before parliament last month.
Claimant lawyers have stressed how vital the revised rate will be for clients, many of who have life-changing injuries requiring ongoing care.
Adrian Denson, director of serious injury at north-west firm Fletchers Solicitors, said claimants whose cases settled under the ‘old’ discount rate now face the knowledge they did not receive enough to cover future costs.
He added: ‘Not only has the victim had to deal with the heartbreaking reality of their life-changing injury, they’ve also had to battle with the added stress and upset of money concerns and not knowing if their compensation will stretch.’
Denson explained the new rate would mean that, for a claimant with a 20-year life expectancy entitled to £100,000 every year, the final sum would now be £2.159m, as opposed to the £1.578m the claimant would have received previously.