The discount rate is used in significant personal injury insurance claims, usually when a person has been disabled for life, and a damages claim needs to include future costs of care and other expenditure over a period which could run to decades.
The discount rate is put in place to ensure that the insurance payout is appropriate and claimants do not profit from an advance payment but also have sufficient funding for their futures.
The move has been made after a local man received £23m. in damages in the island’s highest-ever personal injury award following a motor accident in Rue du Friquet, Castel, in November 2021 where he sustained a complete spinal cord injury, resulting in tetraplegia – a partial or total sensory and motor loss of the arms, legs and torso.
An expert panel has recommended that the island’s discount rate, which comes into effect next month, should be set at -0.75% for the cost of carers or nurses; -0.5% in relation to loss of earnings and damages awarded for professional costs; and 1% positive for other damages subject to price inflation. ‘Setting a personal injury discount rate is ultimately an exercise in balancing competing interests,’ said Kevin Sockalingum, who chaired the local expert panel.
‘The objective is neither to under-compensate nor over-compensate, but to ensure that injured claimants receive appropriate compensation while recognising the impact that damages awards have on insurers, policyholders and the wider community.
'We believe these rates achieve that balance.’
He said the outcome was well-reasoned and reflected the island’s unique circumstances.
The discount rate is specific to the Bailiwick and is different from that for England and Wales, which in turn are different in Scotland and Northern Ireland.
If the discount rate is positive, lump sum damages are reduced, under the assumption that the claimant will safely invest and earn a return.
If the discount rate is negative, the lump sum damages are increased, meaning the defendant pays more up front because it is assumed the claimant’s investments will depreciate due to inflation.
Rates in Britain are reviewed every five years.
You need to be logged in to comment.