In March, the personal injury discount rate was altered from 2.5% to -0.75%. You might think that this doesn’t mean much. However, should you suffer a serious injury, it is the difference between you receiving the right level of compensation to ensure security or not.
For years, there has been no review of the discount rate. Many victims of catastrophic injury have been undercompensated in the wake of this. The changes bring a stop to this and means that a family can now be sure of affording the medical bills. It also secures them from financial strains in later life.
Insurance companies, however, may not agree. For years they have been enjoying an inflation in profits due to the money they save from serious injury victims being undercut. The decision to alter the rate will almost certainly spell a drop in those profits. Their reaction to try and offset these profit drops is to push up motorists’ insurance premiums.
The discount rate
The personal injury discount rate is a very simple concept. When you suffer a serious injury, the offer of the same sum of money each year for care will eventually become a false economy. Care costs rise as does inflation; which is where a flat sum causes the victim of serious injury loses out.
The design of the discount rate is to ensure the amount of compensation the victim receives is protected from these external changes. It gives families and injury sufferers a financial safety net. Its design is for long term care, looking into a claim lasting years, not months. For this reason, it is highly unlikely to ever be seen during a common soft tissue claim.
From the rate change, the only hit taken is insurer profits. Given the insurance industry is one of the UK’s biggest, it is hard to sympathise with such large businesses at the expense of the common person.
From a personal injury standpoint, PI firms will not be cashing in on the rate. The money the rate provides for the victim is has protection.. It is not a figure which personal injury firms will take from. The insurers however, are still lobbying the government, calling the decision “crazy”.
The insurers are benefitting from the whiplash reforms already, but are now contesting that they are losing the savings from them. Their only defence being the claim that serious injury victims will now be “overcompensated”.
Will the rate change?
You may be asking will insurers manage to convince the government to reverse the rate decision. Unfortunately right now it is not certain the rate will remain at -0.75%. The halting of parliament has put a temporary halt on many proposed reforms, including the debate over the discount rate.
When parliament begins again following the election, only then will we really know. Before the election announcement, there was a consultation period in place to offer arguments to Minister Liz Truss. Following the election announcement, all talks were then put on hold. It did, however, ensure the rate stays at -0.75% for now.
Making a claim
Serious injury claims are often made by the family of a sufferer. Serious or catastrophic injuries often require extensive treatment and aftercare. Victims often require financial, emotional and medical support to attempt to maintain a normal life.
With the discount rate under protection for now, it is positive news for suffering claimants and families. If anybody in your family suffers or is suffering from a serious injury that may require long term care, you can discuss the best options with our specialists at Scott Rees & Co.
We offer free, impartial advice as well as no win no fee claims.. If you would like to speak to us you can get in touch weekdays from 9am to 7pm by calling 01695 722 222. Alternatively you can use our online claim form here to let us know details of the injury. From there we can offer you advice on the best options to take.