Dismay at Scottish Discount Decision

Insurers and lawyers have reacted with concern over the announcement by the Scottish Government Actuary’s decision over the personal injury discount rate.

The Scottish Government (pic) has decided that the rate for personal injury awards will be -0.75%. It means that for several years to come there will be a distinctly different rate for awards in Scotland than in England and Wales where the discount rate is set at   -0.25%.

In effect it will means that there is the expectation of higher awards in the Scottish courts, with fears that it will prompt claimants to seek to have their damages assessed in Scotland and will result in higher insurance premiums for Scottish insured.

Alastair Ross, Assistant Director, Head of Public Policy (Scotland, Wales and NI) at the Association of British Insurers said: “This is a bad outcome for Scottish insurance customers and taxpayers that does not reflect the real world environment of how investment decisions are made. It means that compensators, including the NHS, public bodies and insurers, will face higher pay outs in Scotland. A Discount Rate that’s lower for Scotland than England and Wales will mean higher insurance costs North of the Border which could push up premiums for Scottish motorists as a result.”

Lawyers have also been quick to express their concerns over the decision.

Gordon Keyden, Partner at Clyde & Co, described the decision as highly unsatisfactory.

“The decision is hugely disappointing for compensators such as insurers and public bodies, who will now face higher compensation settlements in Scotland, in comparison to those in England and Wales,” he explained. “Whilst a negative discount rate had been forecast at an expected figure of -0.25%, the outcome greatly favours pursuers and will be viewed as highly unsatisfactory by compensators. The decision is likely to adversely affect policyholders as higher insurance premiums for those in Scotland when compared to the rest of the UK will likely result.

“The contrast between the discount rate in Scotland and the rate in England and Wales could encourage forum shopping as litigants, particularly in higher value claims, look to establish jurisdiction in Scotland. In turn, this could affect insureds who operate across borders.”

The Scottish arm of the Forum of Insurance Lawyers (FOIL) issued its own statement

“The lower Scottish rate means that Scottish claimants will receive higher compensation payments. The differential is therefore likely to result in injured people raising claims in Scotland rather than England and Wales if they can. It is feared that this forum shopping will cause delays and higher costs.

“The new rate is very disappointing for the insurance industry which considers that the rate does not adhere to the principle of 100% compensation. This new rate artificially boosts compensation payments well beyond those being paid in the rest of the UK.  As a result it is likely to mean increased costs which will have to be borne by Scottish taxpayers and policyholders.”