Defence body’s bid to curb indemnity fees

An unexpected decision to change the formula for calculating personal injury compensation payments has had damaging consequences for the cost of indemnity. Dr Christine Tomkins, MDU chief executive, explains the impact on the profession and patients.

When the former Lord Chan­cellor, Liz Truss, announced she was cutting the discount rate for legal compensation payments to a historic low from 20 March 2017, she exacerbated a problem which was already reaching crisis point.

The decision to cut the rate to minus 0.75% significantly increased the size of compensation awards overnight.

For those unfamiliar with the term, the discount rate is the interest rate used to calculate the size of lump-sum compensation payments in personal injury claims and is supposed to reflect the return claimants would expect to get from investing their money. The lower the discount rate, the more that defendants have to pay in compensation.