The Ministry of Justice has announced a new formula for the calculation of compensation payments for individuals who suffer long-term injuries as the result of an accident.
The new formula, although criticised for causing increases in car insurance premiums, will be beneficial to victims of accidents or injuries, who are entitled to financial compensation for damages incurred in an accident.
The new formula involves changes to discount rates; when the injured party receives compensation in a lump sum, their pay-out is reduced by discount rates, which make up for the extra money the injured party could make by investing the lump sum over several years. Currently, the discount rate is 2.5%; however the Ministry of Justice has made a decision to reduce the rate to minus 0.75%. The reason for this is that the formula is based on gilt yields, or the interest rate on government bonds, and when inflation is taken into account the real returns on such bonds have actually become negative.
The Association of British Insurers (ABI) has responded by calling the changes “crazy”. With higher insurance premiums looking likely, experts have advised that this could cost young drivers under the age of 22 up to £1000 a year, and Direct Line have stated their expectation that pre-tax profits will be reduced by up to £230 million.
Meanwhile, the changes will have a positive impact on the financial compensation obtained by injured parties who will receive higher pay-outs as a result of the changes. The Association of Personal Injury Lawyers (APIL) started legal action because successive Governments have failed to review the discount rate. The President of APIL has commented: “People already coping with the most severe injuries have been deprived of the help and care they need for years.” This news has been warmly welcomed by lawyers who have campaigned in favour of the changes.
Rebecca Thomas, Director of Personal Injury at Duncan Lewis comments:
“The review of the discount rate is long overdue and the insurance industry should embrace this change. The fact of the matter is that personal injury claimants have been undercompensated for many years which in some cases has meant that they are unable to obtain the care and treatment that they need”.
Duncan Lewis Personal Injury Solicitors have extensive experience representing clients who have sustained injuries as a result of accidents. Duncan Lewis’ no win no fee personal injury solicitors are proud of their reputation for being caring and considerate and for working tirelessly to achieve the best possible outcome for their clients. Personal injury claimants usually have three years from the date of the injury to make a claim for accident compensation. Because of the limitation period for personal injury claims, it is important to seek legal advice from Duncan Lewis personal injury solicitors as soon as possible if you are injured in an accident. Family members can call Duncan Lewis for advice on making a claim if someone close to you has been injured and is still recovering in hospital. For expert legal advice call Duncan Lewis Personal Injury solicitors on 0333 772 0409.