Lord Chancellor Changes The Personal Injury Discount Rate

What is the Personal Injury Discount Rate (PIDR)?

The PIDR is a mechanism used to calculate how much money an insurer should pay to a injured person who has suffered life changing injuries. It applies to the amount they are compensated for their future financial losses, such as loss of earnings and the cost of care.

The intent behind the PIDR is to ensure compensation reflect these losses with a view to putting a claimant in the position they would have been in but for their injury – no more and no less.

However, considerable sums of compensation are often paid in one big lump sum. The claimant might then invest this, and earn interest. The discount rate therefore reflects the interest that the claimant can expect to generate out of said investments, which the insurer cannot be expected to pay. In other words, the discount rate prevents double recovery of funds.