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Car insurance bills to soar for 36m drivers
Tozers’ litigation Partner Stuart Bramley writes –
” It is unsurprising that the insurance industry and the NHS are complaining about yesterday’s announcement but the development was an entirely fair one and was significantly overdue – a change to the discount rate was proposed more than 6 years ago. This may well cost motoring insurers and the Health Service more but the unfairness over the last few years has cost those injured by the fault of others even more. When compensation is agreed, unless the injury has completely healed with no future losses then the calculations about damages will involve the discount rate, which recognises that a lump sum will be invested and will earn interest throughout the injured person’s lifetime. As such, the compensation is reduced to reflect that interest. Since 2001 the discount has stood at 2.5% even through the years when interest rates have been historically low. The only way an individual could earn anything like 2.5% on their damages would be to put it in risky investments.
It should be remembered that this is essential money required to pay for what is often a lifetime’s care and equipment, the need for which only arose because of the negligence of others. Those left in such a vulnerable position should not be required to gamble with their compensation simply to keep it at the figure originally agreed. The fact that the new rate has been imposed by a Conservative Lord Chancellor illustrates that even politicians who say they are committed to minimising public spending realise the unfairness facing injured people. The change is very much to be welcomed by all who support proper compensation for those seriously hurt by others. “