When people suffer permanent life changing injuries, often being left disabled, a mathematical process is used to work out how much money they will need in the future for carers, medical costs, general living and so forth. This is known as “the discount rate.”
The logic behind the “discount rate” is that if someone receives say £100,000 today, on the basis of expenses they will need in mayve 10 years’ time, they could invest that money and it is likely to be worth more than £100,000 in 10 years. However, it must also factor in inflation i.e. the amount £100,000 can buy today will be less than in 10 years’ time. Ideally, the formula should leave people with as close to the amount they will need as possible.
It has been many years since the formula was reviewed and so recently the Ministry of Justice reviewed it and accepted the need for change to avoid seriously injured people being left without enough money to pay for the things they need such as medical expenses, care, home adaptations etc.
In a relief to many personal injury solicitors, the Ministry of Justice agreed to change the formula so that disabled people will now receive adequate money for their future needs.
There has however been an outcry from those insurance companies from whom the compensation is payable. Within days of the announced change the insurance companies secured a private meeting with the Government with a view to reversing the changes.
The private meeting may have had an effect as Justice Secretary Liz Truss has now announced there will be a review of the mathematical formula used. It is thought an independent body will be used in the future to calculate the formula.
Many solicitors in the field of personal injury are dismayed at how rapidly the Government was prepared to meet with insurance companies about the changes and are fearful further changes could negatively impact the amount severely injured people receive in compensation. The Government has however pledged to ensure severely injured and disabled people receive the compensation they deserve.
Aston Knight Solicitors Bury are personal injury and clinical negligence specialists and act for many severely injured clients including fatality matters.