UK Justice Committee report delays Ogden rate changes
The UK's Justice Select Committee has indicated in a report published on November 29 that it needs more evidence into claimant behaviour before it can approve the proposed reforms to the Ogden discount rate.
In its pre-legislative scrutiny of the draft clause, the committee indicated it would like to see more evidence of how claimants invest their damage awards if the Government wants to maintain the principle that claimants should receive 100 percent compensation for losses they incur.
The Commitee welcomed the Government's commitment to the principle of full compensation for claimants, but recommended it clarifies its meaning on this, given that "a lump sum award will nearly always either under- or over-compensate claimants."
"We recommend that clear and unambiguous evidence should be gathered about the way claimants invest their lump sum damages before legislation changes the basis on which the discount rate is calculated," MPs said in a summary of the report.
Back in September, Lord Chancellor David Lidington had proposed to change the setting of the personal injury Ogden discount rate to be set by reference to 'low risk' rather than 'very low risk' investments as at present, better reflecting evidence of the actual investment habits of claimants.
The British Insurance Brokers' Association (BIBA) weighed in on the Committee's scrutiny of the draft, warning that further delays could exacerbate the wider social impacts that the change to a negative rate value back in February 2017 has already had.
"Currently, a Discount Rate -0.75 percent suggests that claimants lose money from investments, rather than them attracting an investment income. This is clearly not the case and underlines why this legislation is urgently needed," said Graeme Trudgill, executive director of BIBA.
“While more evidence may be useful to provide confidence that claimants will not be under-compensated, we feel that the Government already has much evidence to demonstrate that in the real-world, claimants do not lose money from their investments.”
Peter Walmsley, partner at Clyde and Co, commented: "As a sat nav might say, there are delays on the journey but we’re still on the quickest route. While this postponement is disappointing, the good news is that the government remains committed to review the Ogden rate. Insurers will do their utmost to deal with the situation in a pragmatic manner. Clearly it will hamper their ability to plan ahead but they will continue to argue for a more realistic rate. It can also be argued that the delay isn’t necessary because robust evidence of claimant behaviour already exists.”
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