The Justice Committee is undertaking a pre-legislative scrutiny inquiry into the draft discount rate legislation published on 7 September.
The inquiry will review whether the proposed legislation is fair and meets its objective, the proposed new process and the likely impact of the legislation.
As part of the inquiry the Committee is consulting on a number of issues, including the following:
- Objective: Does the draft legislation meets its objective of reflecting actual claimant investment behaviour and ensuring claimants are compensated fairly?
- Fairness: Will the legislation result in a fairer system for both parties? Is it appropriate to move from "very low risk" to "low risk" investments?
- Impact: How will the draft legislation impact claimants, insurers and the NHS? Will changing the methodology result in reduced insurance premiums?
- Process: Who should be on the independent expert panel and are there any circumstances where the Lord Chancellor should not follow the panel's advice? Should there be more than one discount rate?
The draft legislation, which has been welcomed by the ABI as 'a sound basis for setting the rate in the future', inserts new sections to the Damages Act 1996. The amendments specify when the rate should be set, by whom and the review mechanism and are mostly good news for insurers.
However there remains the concern the Lord Chancellor may not go far enough, particularly given the indication the discount rate is likely to increase to 0-1% under the new rules, followed by yet another consultation. Insurers will need to continue to be vocal on this issue to ensure a fair system is ultimately achieved.
The Lord Chancellor reportedly wishes to make significant progress with the proposals and wants the Justice Committee's inquiry to be completed by the end of November.
The deadline for written submissions is Friday 13 October 2017.