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The Ministry of Justice announced this week (15 July 2019) a change to the way personal injury compensation payments are calculated – setting the personal injury discount rate to minus 0.25% (from minus 0.75%). The new rate will be effective from 5 August 2019.
This is very welcome news for people who’ve suffered serious and often life-changing injuries through no fault of their own, ensuring they receive the fair level of compensation they deserve to meet their lifelong needs. The rate announced is significantly different to the much more restrictive rate which many commentators in the insurance industry had predicted.
But how does this work and what does it mean if you are making a personal injury claim?
As the name suggests, the ‘discount rate’ is a percentage used to adjust the compensation personal injury claimants receive. The discount considers the amount of interest they can expect to earn if they invested their lump sum allowing for the effects of such items as potential future inflation, tax and likely investment costs.
What this means in reality is that if you’ve received personal injury compensation, when the time comes to pay for an expense in the future, (for example, to pay for additional specialist care or equipment), you will have sufficient funds available to pay for it.
So, why has there been so much fuss about the discount rate?
The reason for much of the furore is that the insurance industry is concerned that it will have to pay out significantly higher sums on behalf of defendants and it is argued, this will lead to more costs being passed on to its customers.
However, according to the Association of Personal Injury Lawyers (APIL), the Government’s own impact assessment estimates that the increase in the rate could bring savings to insurers of between £230m and £300m per annum.
This means more of a win-win situation with “a more balanced approach that would give personal injury victims full and fair compensation”.
Another positive from this week’s announcement is that there is now a clear, statutory methodology to ensure the discount rate is formally reviewed at regular intervals. Under the Civil Liability Act 2018, the personal injury discount rate will be reviewed within a five-year period, with future reviews advised by an expert panel.
In our view, this must be good news for defendants and claimants alike ensuring individuals receive full and correct compensation for any losses suffered and that the rate is reviewed on a regular basis to ensure calculations are accurate and fair to all.
Here at Novum Law, we always put our clients first and work hard to secure the maximum amount of compensation available to those who’ve sustained serious injuries due to the mistakes or negligence of others.
If you have any questions about the new discount rate or any aspect of personal injury compensation, call us on: Freephone 0800 884 0777 or email: email@example.com.