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Published 12 September 2017
The Government has now published the response to the consultation process on how the discount rate should be set in the future and what is to happen next.
Whilst the approach of 100% compensation is preserved, it is clear from the responses received that claimants invest in low risk diversified portfolios and not in "very low risk" investments, such as ILGS alone.
As a result, the law as it currently stands produces awards that provide more than 100% compensation with the inevitable ripple effects across compensators and consumers alike. In summary;
The clarity from government is welcome and will enable both claimants and defendants to adopt a pragmatic approach to settlement of claims. There continues to be an advantage in dialogue and JSMs and other discussions should not be delayed.
The 3 year cycle of reviews (that may be more frequent) will also have some impact on claims handling in the future as parties try to second guess what the outcome will be and potentially seek to expedite or delay claims on what they think will be in their clients' best interests. However, it is anticipated that the significant change of rate that we saw last time is less likely to occur in circumstances where the review is regular, unless there has been any significant and unanticipated change in the economic climate in the intervening period.
There remain unanswered questions in relation to accommodation claims and the application of Roberts v Johnstone using the current rate. The appeal in the case of JR v Sheffield Teaching Hospitals NHS Foundation Trust will be heard soon.
For more information and the full publication of the Governments response, please click here.
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