Any victim of an accident who has suffered serious injury and is making a claim against whoever was to blame would do well to keep an eye on the Civil Liability Bill and to government action which follows it being brought into law. The Bill to apply in England and Wales was introduced to the House of Lords this week. It will result in compensation awards being reduced and so it will be more beneficial to claimants to settle or have their claims tried by a judge under the current law rather than the expected new law. We are some way off seeing the expected new law in action but serious personal injury claims can take a long time to be brought to a conclusion. Hence, the eye on the Bill.
This is what it is all about. A serious injury can require long-term care and long-term medical expenses and treatments. Future losses. A claimant should be compensated for these by the insurers for the blameworthy defendant and this will be by a lump sum on top of compensation for pain and suffering and other losses. But this lump sum will be invested and only used as and when money is needed, perhaps over many years. The investment will earn interest for the claimant. The law already provides for the lump sum to be reduced by a percentage figure which reflects the likely interest that the investment will earn. It's called a discount rate and it is widely accepted that the discount rate being applied is over compensating claimants. It is too low and claimants are effectively making a profit to the displeasure of insurers and often the NHS where it is shelling out the cash.
What looks like happening under the new law is that the discount rate will reflect the interest likely to be generated from a low risk diversified selection of investments instead of a very low risk selection as now. Spot the difference. In practice, that will have a substantial impact on the discount. The new rate is intended to be reviewed 'promptly' after the law is on the statute book and to be reviewed at least every three years. It will apply across the board to all relevant cases.
As to whether the new law will bring down insurance premiums, don't hold your breath!
For much more on compensation of all kinds, keep both eyes on Breaking Law.