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Justice Minister launches review of how personal injury compensation should be calculated

The Cost of Insurance Working Group (CIWG) was established in 2016 to analyse the high costs imposed by insurance companies.

JUSTICE MINISTER CHARLIE Flanagan has launched a consultation seeking views on the manner in which the discount rate in personal injuries cases should be set.

The discount rate, in relation to personal injuries claims, is the percentage used to adjust the lump sum awarded in these cases to factor in future losses, costs and expenses which are to be experienced by the aggrieved party. 

The Cost of Insurance Working Group (CIWG) was established in 2016 to analyse the high costs imposed by insurance companies. It is also to determine what actions the Government might take to address any issues that might be contributing to these costs.

The CIWG recommended that an examination of the setting of the discount rate be undertaken. It also urged that a public consultation be carried out on the issue. 

Minister Flanagan said: “The discount rate, also known as the real rate of return, is used by courts to determine the size of an award necessary to compensate a person for damages for future loss.  At present, the rate is determined by case law, although the Minister has the power under the Civil Liability and Courts Act 2004 to set the rate by Order.”

The Minister is requesting submissions from the public on two key issues as they relate to the discount rate. They are if it should it be up to the judiciary to decide on the appropriate rate on a case-by-case basis, or if legislation should be changed to allow the Justice Minister to determine the rate.

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Flanagan has also called for public consultation to see if there is a need to follow the UK’s route and “update the investment strategy that a plaintiff is assumed to take in determining the discount rate (currently very risk-averse)”.

Flanagan stressed: “In engaging in this consultation my intention is not to change the fundamental principle that a claimant should be fully compensated but to ask a series of questions about what, if anything, needs to be done in order to update the current system of setting the discount rate.

“In particular, I am calling on academics and practitioners with a particular interest or expertise in this area of insurance law, to provide their input and help us to develop a system that will ensure consistency.” 

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