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Michael - no, the decision yesterday was the result of the review that was first announced in Nov 2010. It's been kicked into the long grass a few times since then with I think a consultation and then getting expert views and then a further long delay. APIL has issued judicial review proceedings at least once to prompt an actual decision.

I share the views others have stated - i.e. that this should be about fair compensation not the cost to insurer's profits or to motorist's premiums. I act for Claimant's, and for the last few years it has been embarrassing to try and explain to clients that the Court assumes that they'll be able to get a 2.5% real return on safe investments, after tax and inflation are taken into account. It can't be done, and hasn't been possible since 2007/08.

Having said that (and please hear me out), I think there is at least some truth when the insurers say this will lead to over-compensation. This is a big change to the discount rate, applicable to all cases of future loss, but there are different considerations when looking at investment returns over the short, medium and long term. A case decided today could easily deal with life expectancy figures of 50 years+. Does the current expert view support a rate of -0.75% as an average rate of real return on safe investments over 50 years or more? I don't know, but I'd be surprised.

So limited reform, providing for a more nuanced approach rather than one size fits all, might be reasonable. Rates could be set for say 5, 10, 25 and 50 year time frames, with a graduated change in between those rates depending on the anticipated period. For example, a life expectancy of 38 years would be somewhere between the 25 and 50 year rates, and I'm sure the Ogden table group could provide a clear methodology to use. This would avoid big step changes and bizarre situations e.g. a Claimant would be arguing for a lower life expectancy as it attracted a lower discount rate.

More fundamentally, PPO's avoid this issue entirely. Perhaps the government could review the status of the MDU, MPS etc... and force a change into proper insurance providers rather than mutual indemnity providers. They'd then be considered secure for PPOs under the Damages act, and large claims against GPs and private doctors wouldn't be affected as badly by this change. (Another embarrassing explanation to clients: no, doctors don't need to have insurance, and the mutual defence societies aren't legally obliged to pay out!)

Also, many claimants with very severe injuries have to have large lump sum elements alongside PPOs in order to pay for adapted accommodation. Roberts v Johnstone has been ripe for review for a long time, and a more flexible approach to accommodation costs in particular is needed. Again, this could shift damages to PPOs which is fairer for everyone concerned.

However, the limited hints so far point to a more short sighted/unfair approach to any law changes - I suspect a change that bases the rate on a more risky approach to investment than gilts. That will allow for a much higher discount rate to be set, as long as you're happy to ignore that it will require Claimants to take risks with their future care costs.

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