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Discount rate changes

S-Tech News

In March the rate used to calculate the amount of compensation to be paid to seriously injured individuals changed. But how might these changes affect you?

The Discount Rate is part of the calculation to determine the amount of compensation awarded in cases involving serious injury. The rate has not been changed since 2001 but in March 2017 it was adjusted from 2.5% to -0.75%.

The reduction in the Discount Rate reflects the fact that less investment income is expected today when compared to 2001. It ensures that claimants are appropriately compensated over the remainder of their lives.

The effect of this will be an increase in the value of claims for future financial loss. The change is most significant for younger claimants, for whom the settlement needs to cover the greatest length of time. To give an example, an award made to a 27-year-old female with a life-changing injury will increase from £6.5m under the old Discount Rate to approximately £14m under the new one.

The discount rate applies to injury claims and so this may mean an increase in insurance premiums for motor or liability products. It may also mean that liability levels could increase.

Please call us to discuss this or any other enquiry.