In its response to May’s Ministry of Justice’s (MOJ) Damages
Discount Rate consultation, the British Insurance Brokers’
Association (BIBA) outlined its call for urgent changes in the
law used to set the rate and called for experts to be involved.
BIBA Executive Director, Graeme Trudgill said: “BIBA’s response
to the MOJ expressed our members belief that it is unlikely that
many individuals would seek, or be advised to seek to invest all
of their lump sum payments in index-linked gilts. It is very
unlikely that a prudent investor with appropriate advice would
receive a negative return. The Lord Chancellor’s proposed reforms
included a change to the way the Discount rate is 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.’ This proposal reflects our call
for the process to reflect the way compensation monies are
actually invested.
“In addition the proposals include the provision for an
independent expert panel to advise in the process, something that
BIBA also requested in our submission.
“BIBA now calls for a speedy timeframe for implementation of
these proposals to end the uncertainty for customers brought
about by the significant under insurance risk and increase to
premiums that February’s discount rate change caused.
“The insurance industry was united in it approach to Government,
and in its desire to achieve a fair balance of compensation for
injured parties as well as reversing the unintended consequences
of the change.”
