Discount rate review may lead to increased injury claims awards

While the Lord Chancellor reviews the discount rate that is applied to all personal injury claim compensation awards in the UK, injury solicitors have stated that a change in the discount rate could lead to an increase in awards to successful claimants.

The discount rate is used to make adjustments to the final personal injury compensation award during the accident claims process.  The discount rate adjusts the final award sum based on how much profit a claimant may make by investing his compensation award over time.

The Lord Chancellor may adjust the level of the discount rate as he sees fit.  Late last year he announced that he would be reviewing the discount rate, but there has been no announcement in several months concerning the issue.  This has led the Association of Personal Injury Lawyers to press for a response in regards to an adjustment.

Courts have held in the past that claimants run the risk of overcompensation if they take a sizable compensation award and invest it, thus receiving a greater return than the amount they are actually awarded.  The discount rate subtracts a percentage from their total award as a way to compensate for investment activity on the part of the claimant.

The current discount rate of 2.5 per cent was originally set in 2001.  However as the economic landscape has changed drastically in the last decade, legal experts are concerned that claimants may end up being overcompensated because of the relative softness of the investment markets.  Many advocacy groups have therefore begun campaigning for a reduction in the discount rate to counteract the current economic uncertainty.

The APIL hopes that the Lord Chancellor will decide to reduce the discount rate in order to ensure that claimants receive the proper amount of compensation for injuries they have sustained through the negligence of others.

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