Adapting to the Personal Injury Discount Rate (PIDR) Increase

In December last year, it was announced that the Personal Injury Discount Rate (PIDR) would increase to 0.5%, as required by the Civil Liability Act 2018. The change came into effect earlier this month on January 11th.

Whilst the discount had been widely anticipated by insurers/practitioners, and many would have already factored the expected increase into their financial modelling prior to the announcement, there are several important considerations to take into account when doing so to ensure a seamless transition for ongoing claims and accurate reserves in future.

Below Ravinder Johal, Head of Litigation — Strata Solicitors, GB's In-House Law Firm, illustrates some of the key considerations to ensure you are making the correct calculations and maximising the potential of the increased discount.

Updating Your Financial Modelling to Reflect the Changes

Claimant Gender

The rate change will have a slightly greater impact on female claimants than male. For example, under the old -0.25% rate, a multiplier for loss of earnings to pension age 65, for a 20-year-old female was 46.95 and is now 39.78 — a difference of 7.17, however the same multipliers for males were 46.53 under the old rate and 39.45, now — a difference of 7.08

Loss of Pension Claims

There will be a significant impact on multipliers for loss of pension claims. For example, a 30-year-old female claiming pension from 24.2 to 16.84. On a purely illustrative basis, a 20,000 per annum pension loss would reduce from 484,000 to 336,800.

Lifetime Multipliers

Lifetime multipliers will take careful consideration. The impact will be greater, as the period of loss increases. For example, a 20-year-old male claimant's multiplier will reduce from 72.46 to 56.15.

Getting Your Reserves Right

Reserves should be reducing

If your reserves are not reducing, then you need to double check the Claimant's schedule of loss — did they plead the correct multipliers in the first place — what is the claimant's expected age at trial, has trial now been listed?

Applying the correct multiplier

This is a good opportunity to familiarise yourself with the Ogden tables again and just double check that the correct figures have been used. There are so many lines and columns that make it easy to choose the wrong figure, which can alter a reserve by several thousand pounds.

Ensuring You Have the Expertise to Be Agile with Your Live Cases

When adjusting to any kind of broad industry change, there can be significant work required, rapidly, to make certain that your live cases stay ahead of the curve. Having the right partner to help you scale and adjust quickly is a simple strategy to ensure that you can make the important immediate adjustments whilst also focusing on the bigger picture affects of the changes for pipeline cases.

Having adequate resources and dedicated expertise on hand can ensure important aspects such as cases where Part 36 offers have been made, but not yet accepted, are not overlooked. The right experts can help you make important decisions such as whether to withdraw or vary offers that now over value cases.

A dedicated partner can also help you handle cases where future losses have been pleaded and/or reserved.

Now is the time to make sure that you have employed all the new calculations correctly and factored in all the relevant variables that go along with them.

To discover how GB's litigation experts can help you adapt and make the most of changes like the PIDR increase reach out to us today.