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Victims of catastrophic injury risk being under-compensated

1 December 2017

A warning from MPs that the government must learn more about how people invest vital compensation from catastrophic injury before they change how pay outs are calculated has been strongly endorsed by the Law Society.

The warning came in response to government proposals to change the method for setting the rate under which compensation for victims of serious injury is calculated amid fears this will lead to people with life-changing injuries receiving less.

Law Society vice president Christina Blacklaws said: “A regular review of the discount rate clearly makes sense, but government proposals to change the rate must not undermine the key principle that those affected should get 100% of the compensation they are owed.

“We are very pleased MPs on the commons justice select committee are aligned with us on so many key points on this issue. Vulnerable people are the ones that are impacted by changes to the discount rate and it is essential there is a strong evidence base before changes are made to the method of setting the rate.

A change to the rate - made earlier this year - resulted in fairer compensation for those who have been seriously injured, many of whom require ongoing care. The Ministry of Justice (MoJ) has proposed measures which would partially reverse that change.

Christina Blacklaws added: “For people catastrophically injured through someone else’s negligence this technical process of calculating compensation is a very important part of our justice system. Lump sum compensation payments have to last that person’s lifetime. Any future changes to the assumptions about how damages will be invested should be evidence-based.”

MPs scrutinising the MoJ proposals are concerned that without ‘adequate safeguards’ the most vulnerable claimants could be significantly under-compensated. They questioned the rationale put forward by the government and echoed Law Society recommendations that any changes to the personal injury discount rate should be based firmly on evidence.

Christina Blacklaws concluded: “We hope the lord chancellor will accept the recommendations of the select committee.”

Notes to editors

  • In finalising the compensation amount, courts apply a calculation called the Discount Rate – with the percentage linked in law to returns on the lowest risk investments, typically Index Linked Gilts.
  • The rate changed from 2.5% to -0.75% in February based on the current formula, prompting the insurance industry to lobby furiously for a rethink as the change hit profits. Ministers believe that a figure set according to government proposals would be between 0% and 1%.

About the Law Society

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