Personal injury lawyers have denied being part of a ‘conspiracy’ to ensure their fees increase through the revised discount rate.
The Association of Personal Injury Lawyers (APIL) insisted the rate is about the compensation an injured person receives and nothing else.
Lord chancellor Liz Truss last month announced a change in the rate of discounts from compensation payments from 2.5% to minus 0.75% – in effect a top-up. The new rate comes into force next Monday.
Insurers accused lawyers of forcing through the change to cash in, either through tie-ins with investment divisions or financial advisers, or through cases taking longer and warranting higher fees.
Neil Sugarman, APIL president, said insurers have benefitted from the discount rate for years and what matters now is to shift the cost of caring for people away from the state.
‘It is imperative that the primary fact is made clear that the new discount rate is a correction to ensure seriously injured people receive the compensation which they need and to which they are entitled,’ he added.
‘It is scandalous to suggest that the law is part of a conspiracy to benefit lawyers. Lawyers are regulated, qualified, professional people and their job when someone suffers life-changing injuries is to help that person rebuild his or her life.’
Truss last week came under pressure from insurers and Conservative backbenchers as the chancellor Philip Hammond revealed he has set aside £5.9bn to cover the cost of claims against the NHS over the next five years.
The Office for Budget Responsibility said the revised rate will ‘substantially increase’ the size of one-off settlement payments and is expected to increase insurance premiums.
Responding to yesterday's budget, Conservative MP Jacob Rees-Mogg called on the government not to proceed with the discount rate reduction.
‘The idea that awards against the government should be calculated with a negative time cost of money is wrong,’ he said.
‘It would be better and cheaper for the government to underwrite annual payments, rather than making lump-sum payments with a discount rate of a negative kind.’
Motor insurer Direct Line announced to the London Stock Exchange that the change has cut its pre-tax surplus for calendar 2016 by 38%, from £570.3m to £353m. Admiral said its pre-tax profit fell by 25% in 2016 after what it called the ‘eccentric’ decision to reduce the rate.
The firms joined a number of insurers to meet with Hammond in the aftermath of Truss’s announcement to call for legislation to ensure a new way of calculating deductions from compensation payments.