Opening remarks

Medical Protection Society (MPS) welcomes the opportunity to make a submission to the call for evidence in relation to setting of the Personal Injury Discount Rate (PIDR).

We are the world’s leading protection organisation for doctors, dentists and healthcare professionals with more than 300,000 members around the world, including over 138,000 in England and Wales.

This review is particularly relevant to us since membership to MPS provides members with the right to request indemnity for damaged arising from professional practice. Changes to the PIDR have profound consequences on the cost of clinical negligence and this in turn has a significant impact on healthcare professionals and on the NHS.

Healthcare professionals are required to ensure they have adequate indemnity or insurance against clinical negligence claims, and the majority of doctors and dentists whose practise is not covered by a state-backed indemnity scheme do this through their membership of MPS or one of the other medical defence organisations. As a responsible and well-managed defence organisation, we have an obligation to reflect the rising costs of clinical negligence in membership subscription fees so we can be in a position to defend members’ interests long into the future.

Our aim in responding to this and other consultations on the PIDR is to ensure a fair and predictable framework for setting the rate. The ultimate outcome we seek is that the rate is set in a way that enables reasonable compensation for patients who have been harmed due to clinical negligence, whilst balancing this with society’s ability to pay.

MPS does not represent claimants or hold data on claimant investment behaviour. We have therefore restricted our response to the questions where we can add most value to the review, with most of our answers focused on the relative merits of setting a dual or single rate. We would however be more than happy to discuss any aspect of our submission further or to provide more information on the wider impact on healthcare provision that arise from changes to the PIDR.

General commentary on the merits of dual and multiple rates

MPS remain of the view that the most important factor which determines whether patients are adequately compensated is the setting of the discount rate, rather than switching to a dual or multiple rate system.

MPS damages experience indicates the proportion of claimants (in this case patients) with a period of future losses less than 5 years is a relatively low, and this proportion gets lower as awards get higher. A change in the approach to calculating damages for personal injury may increase complexity but not materially change the position of claimants with short life expectancies or a short and finite period of losses.

Even some higher value damages in relation to dental treatment, often have long periods of future loss as revision intervals for many dental treatments (such as crowns and implants) are in the order of 12 to 15 years or longer. As such, even some of the lower value claims handled by MPS do not fall into the category of short periods of future losses.

Claimants with very short period of future loss, who then invest their damages or need to achieve growth of their capital to meet short term needs, are even fewer. Only those claimants with longer periods of loss are likely to invest their awards. Multipliers for short life expectancy periods of 5 years and below are closer to 1, meaning there is unlikely to be any shortfall in damages in practice.

In our view the current single rate does not adversely affect claimants with short life expectancies and does not place them in a position where there is a shortfall of damages which needs to be made up for by investing over a short period.

If the Government is minded to adopt a dual or multiple rate system, then we reiterate our previous view that the Ontario system would be the most appropriate approach. This is in line with the majority of responses which were received to the 2023 PIDR consultation.

Dual or Multiple Rates

Question 22) How much additional complexity or difficulty would implementing a dual rate by duration approach add to the litigation process (please provide evidence to quantify this either by time to settlement, additional legal costs and/or any other relevant factors)?

Implementing dual or multiple rate systems could introduce significant additional complexity and difficulties.

One major disadvantage is the increased complexity for both claimants and compensators.

Without blending rates, there is a risk of heightened disputes between parties, as each seeks to argue for the outcome most beneficial to them or their client. This not only prolongs the litigation process but also delays access to compensation for injured parties, while simultaneously escalating costs.

The adoption of a dual or multiple rate system could also incentivise parties to stall proceedings to secure more favourable short-term future loss rates. This tactic not only prolongs the resolution but also ties up valuable court resources. Additionally, the potential increase in the number of experts required to comment on quantum could further inflate costs.

The implementation of such a system may also strain resources, particularly in terms of reviewing short-term rates frequently, leading to an increased burden on the courts and legal system.

Volatility in short-term rates adds another layer of complication and unpredictability.

We see an impact particularly being on NHS Resolution, who would face significant resource constraints by having to review a full book of reserves with each short-term rate review.

For litigants who already struggle with the complexity of the current system, further layers of complexity could prove overwhelming.

Finally, ensuring a smooth transition to any new system would require sufficient lead-in time to adapt models, systems, and update reserves. It is unclear if this proposed review would provide adequate time for such implementation.

Question 24) Should a discount rate by heads of loss be implemented, different damage inflation assumptions would be assumed for different heads of loss. Under this mechanism, what changes to the following characteristics of the representative claimant (or alternative representative claimants) would apply:

a. Investment period (under the single rate methodology, 43 years was previously assumed);

b. Investment portfolio (under the single rate methodology, a 57.5% allocation to matching assets and 42.5% allocation to growth assets was previously assumed. Please refer to Table 1 for full details); and

c. Tax and Expenses assumptions (under the single rate methodology, a range of 0%-0.5% based on the initial award value for the former and 0.6%-1.2% for the latter, with a total modelled assumption of 0.75% was previously assumed).

We note that the summary of responses to the 2023 call for evidence shows that most respondents did not favour such an approach and our view is that to adopt such an approach would be unwise.

There are clearly concerns that such a system would not be the best solution should the Government be minded to introduce a dual or multiple rate system. In fact, most respondents appear to favour the Ontario system should such a change be introduced.

Question 25) How much additional complexity or difficulty would this approach add to the litigation process, and would this be greater/lesser/about the same as if a dual rate by duration were implemented? Please provide evidence to quantify this either by time to settlement, additional legal costs and/or any other relevant factors.

We are unable to provide evidence to quantify additional time to settlement or increases in legal costs or resources.

We are however concerned that adopting a ‘head of loss’ approach would increase the complexity of personal injury claims. Setting the different rates could prove problematic and increase uncertainty for compensators. Frequent changes in rates, if that were to occur, would have to be met with changes in the discount rates applied to the relevant heads of loss. This would take up GAS and Lord Chancellor time, as well as having knock on effects on reserving.

Question 26) Should a discount rate by heads of loss be implemented, do you believe that the concept of modelling one representative claimant remains appropriate or is modelling a representative claimant for each head of loss a better approach?

We have no data to be able to answer these questions. However, we consider that modelling different representative claimants for each head of loss would be unnecessarily complex.

In practice claimants do not invest different heads of loss in different ways - they take a mixed approach across their portfolio. To expect that certain damages would be invested in certain ways risks over or under compensating claimants.

The availability of Periodical Payment Orders

Question 29) How readily available are PPOs to claimants in practice and how does this vary by groups of claimants (additional data on groups that are less likely to have a PPO made readily available would be helpful)?

As of September 2016, MPS no longer offers PPO arrangements to new applicants. We continue to facilitate PPO payments to claimants who have existing PPO arrangements, and MPS will of course continue to meet its commitments.

Question 30) What factors influence the take up of lump sums versus PPOs? This could include the preferences and behaviours of one or more of the parties involved in the settlement process and associated litigation strategies.

In our experience, most claimants, even those with high value lifetime losses, do not request PPOs from MPS. We are very infrequently asked about the availability of PPOs. As we do not offer PPOs we cannot give any insight into factors that affect the attractiveness of a PPO to claimants.

About MPS

MPS is the world’s leading protection organisation for doctors, dentists and healthcare professionals with more than 300,000 members around the world. 

Our in-house experts assist with the wide range of legal and ethical problems that arise from professional practice. This can include clinical negligence claims, complaints, medical and dental council inquiries, legal and ethical dilemmas, disciplinary procedures, inquests and fatal accident inquiries.

MPS is not an insurance company. We are a mutual non-for-profit organisation and the benefits of membership of MPS are discretionary as set out in the Memorandum of Articles of Association.

Contact

Should you require further information about any aspects of our response to this consultation, please do not hesitate to contact us.

Megan Ball
Policy and Public Affairs Manager
[email protected]