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IFoA concerned discount rate places undue burden on claimants

The Government has today (Tuesday 20 March 2018) made an announcement on the personal injury discount rate, which will form part of the Civil Liabilities Bill. The Institute and Faculty of Actuaries (IFoA) is disappointed by the decision to move to a ‘low risk’ rather than a ‘very low risk’ assumption of a claimant’s investment appetite.

Marjorie Ngwenya, IFoA President said:

"We have consistently argued that claimants should receive a settlement that does not require them to take on investment risk in order to have a chance of meeting their awarded income needs. Insurers and the government are better placed to manage these risks than the injured party.  Claimants should not be treated as speculative investors. These are vulnerable, often catastrophically injured people, in need of support to maintain a decent quality of life.

"We are pleased to see the expert committee chaired by the Government Actuary will oversee periodical rate changes. However, having a three year defined interval for review of the rate may encourage claimants to rush to settle claims, or to unnecessarily hold off settling to seek the most favourable rate.

"Ensuring that claimants are awarded fair compensation may result in higher insurance premiums for all. This is therefore a difficult balancing act for the independent expert panel and one which should be carried out with full transparency. 

"Regardless of today’s announcement, the IFoA still strongly believes that, where appropriate, the use of periodical payment orders (PPOs) should be encouraged for claim settlement. PPOs provide claimants with additional security, and a guarantee that they will not exhaust their compensation before they die. By contrast, a lump sum can reflect how long an individual is expected to live, but it cannot reflect how long an individual will actually live."

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