Law Change to increase Personal Injury Compensation
The Lord Chancellor has introduced a change to the legal formula used to calculate lump sum compensation payments for life-changing injuries. The change, which came into effect in England and Wales on 20th March 2017, will radically change the ‘discount rate’ from 2.5% to – 0.75%. The discount rate is expected to change here in Northern Ireland following the appointment of a new Justice Minister, alternatively in the interim the Secretary of State may be petitioned to implement the change in this jurisdiction.
What is the Discount Rate?
The discount rate is the assumed rate of return on investing a lump sum. It was last changed in 2001 and has not been amended again until now, despite interest rates falling during that time. The change in rate will result in those being awarded compensation for life-changing injuries receiving a greater lump sum. This means that rather than any lump sum award being discounted to allow for a 2.5% investment return, the indemnity settlement will be increased by 0.75%, reflecting a decision that over the long term there is predicted to be a negative return on investment. The effect of this change will be to increase the value of claims for future financial loss and will hopefully ensure that people who have had life changing injuries will be adequately compensated for the rest of their lives. In particular the change in the discount rate will very significantly increase damages for those under 25 and also those with a pension. In some cases damages will be increased by hundreds of thousands of pounds, or for example, in birth injury cases by millions of pounds.
Reaction to the Change
Perhaps not surprisingly, the change to the discount rate has been heavily criticised by the insurance industry, with a number of insurance companies projecting a large drop in profits. The Association of British Insurers has described the change as “reckless” and warned that car insurance premiums may have to increase further. The Association of Personal Injury lawyers responded by saying that insurance companies have saved millions of pounds in unpaid compensation, and have been aware that a decision to change the discount rate has been on the cards for six years. It went on to say ‘they have had plenty of time to prepare for this change and the fact that many are now saying premiums will have to rise to cover the cost simply beggars belief.’
What we say
MTB Solicitor Tanya Waterworth is an APIL Accredited Senior Litigator and attendee of APIL Regional Meetings. Tanya stated “the change to the discount rate is a welcome development. It will ensure that individuals who suffer catastrophic and life-changing injuries will now be fairly compensated.”
MTB are currently acting in a number of complex cases involving catastrophic injuries. The change in the discount rate could have a significant impact on the compensation that can be secured in these cases. Last year, MTB obtained over £5m compensation in a medical negligence claim for a then 8-year old girl, one of the largest ever settlements of its kind in Northern Ireland.
At MTB Solicitors, we strive to obtain the maximum amount of compensation for all of our clients. We can advise you on all aspects of a personal injury claim, including the upcoming change to the discount rate. If you require any advice in relation to an accident or a potential claim, please do not hesitate to contact us on 02890329801.