Insurers have benefitted for years from the high discount rate used to calculate compensation for victims of serious injury, which is now being lowered. Injured victims will be asking why it wasn’t lowered sooner
One of the UK’s most experienced serious injury law firms has criticised the insurance industry for fighting against the Lord Chancellor, Liz Truss’s decision to update the ‘discount rate’ used to calculate the level of compensation paid out to victims of life changing injuries.
Thompsons Solicitors argues that insurers have known for years that the discount rate was skewed unfairly in their favour, and that the announcement by the government to lower the rate from 2.5 per cent above inflation to minus 0.75 per cent is wholly justified and should ‘come as no surprise’.
The discount rate was set at 2.5 per cent in 2001 by the then Lord Chancellor meaning that lump sum compensation paid by an insurer to a person with a serious injury would be discounted by a certain fixed amount, on the assumption that the person will invest that money safely.
Through investment, the person would in theory achieve the fair and proper amount of compensation needed to provide for their loss of earnings, essential care and accommodation.
However, that discount rate, which was broadly appropriate in 2001, has been at odds with the actual return on investment figures for many years, and at least since the stock market crash of 2007-8. The Lord Chancellor had to set the rate at the figure she has reached, as the courts would overturn any other decision.
Samantha Hemsley, national head of the serious injury and clinical negligence team at Thompsons said: “What we’re talking about here is people with life changing injuries, people who need care and support for life, who were injured through no fault of their own. People who suffer life changing injuries need fairly compensating to enable them to afford to meet the costs of essential care and therapies, they are not looking to get-rich-quick or whatever nonsense the insurers seem to believe.
“We are talking about people who have suffered the most horrific injuries and seek only to afford to the costs of their care. If this compensation is not available or is insufficient to meet those costs the burden of that care and support falls upon our already stretched NHS. That cannot be right.”
“Ultimately, insurers have been benefitting from an average of £75 per motorist – which is what they now say it will cost consumers. They have been silently accumulating this windfall every year since 2008. If we use government figures which calculate there are around 45.5m drivers in the UK, that works out at over £30bn in savings for the insurance industry built up over the last decade.
“It’s high time they started paying that money to the injured people they are supposed to compensate, rather than relying on the NHS and taxpayer to fork out for treatment and care that their years of underpayment has avoided.
Gerard Stilliard, head of personal injury strategy at Thompsons added: “The insurers’ suggestion that solicitors will somehow benefit from the new discount rate is fundamentally untrue and frankly a transparent attempt to distract public attention from what is really happening here. Lawyers won’t receive any significant additional fees as a result of the correction to the discount rate that is all about benefiting the innocent victims of serious injuries. It should come as no surprise to the insurance industry, which has known for years that it was artificially lining its pockets with extra profit.
“In opposing this correction, the insurance industry is showing itself as not only greedy but heartless, and we urge the government to ignore their desperate attempts to hold on to money meant for those who need it.”
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