The announcement from, Liz Truss (Secretary of State for Justice and Lord Chancellor) at the end of February re her decision to change the PI discount rate has shocked the industry and triggered a lobbying campaign by Insurers for a U-turn.

man in wheelchair - representing importance of litigation costs management software
The rate change, that affects deductions from compensation payments, is due to come into effect on 20 March 2017 and is expected to have a significant impact on payments received by clients, in particular those suffering life-changing injuries.  The Justice Secretary has reduced the discount from 2.5% to minus 0.75% which experts are saying means for a claimant with a 20-year life expectancy entitled to £100,000 every year, the final sum would now be £2.159m, as opposed to the £1.578m the claimant would have received previously.


Insurers believe the move will cost their industry millions of pounds and send premiums higher for customers. The announcement caused shares across the sector to plummet by as much as 7%.

Although seen as a significant blow by insurers the consensus of opinion amongst industry claimant lawyers is overwhelmingly that the revised rate is vital for PI clients, especially those with life changing injuries requiring long term care, unable to work and facing ever increasing care costs.

In her statement to parliament Liz Truss explained: “The discount rate was last set in 2001, when the then-Lord Chancellor, Lord Irvine of Lairg, set the rate at 2.5%. This was based on a three year average of real yields on index-linked gilts. Since 2001, the real yields on index-linked gilts has fallen, so I have decided to take action. Having completed the process of statutory consultation, I am satisfied that the rate should be based on a three year average of real returns on index-linked gilts.

“I recognise the impacts this decision will have on the insurance industry. My Rt. Hon. Friend the Chancellor will meet with insurance industry representatives to discuss the situation.”



Select Legal Systems Limited, specialise in legal practice management software for law firms.  Their flagship suite of legal software, LAWFUSION, offers a comprehensive Personal Injury module offering step-by-step PI procedures, costs management functionality and two-way integration with the MOJ Portal. For more information please call during office hours on 01482 567601.  Alternatively our online enquiry form  is available around the clock.