The Personal Injury Discount Rate is Being Cut – But What Does That Mean?

Personal injury discount rate changes

Personal injury discount rate changesThe Lord Chancellor has lowered the discount rate applied to personal injury compensation claims from 2.5 per cent to -0.75 per cent. This means that anyone awarded compensation will get higher amounts to cover their lifetime care and future financial needs.


What has Happened to the Personal Injury Discount Rate?

Liz Truss, the Lord Chancellor, has changed the personal injury discount rate (also called the Ogden rate). She has said that in law this was the only thing she could do. The discount rate had not been reviewed since 2001, and of course interest rates for investments are much lower now than they were then.

Personal injury compensation is paid as a lump sum. The courts assume that the lump sum will be invested and will earn interest, and therefore they discount the lump sum to take those future earnings into account. The bigger the discount, the smaller the lump sum.

This change therefore means that insurers (and public bodies such as the NHS) will have to pay bigger amounts as a lump sum because the discount has been reduced.


What does it Mean?

For the individual who is making a claim and who has won compensation, this is good news. They will get a bigger lump sum. This has been welcomed by The Association of Personal Injury Lawyers (APIL).

For the insurance company, of course, it goes the other way. They will now have to pay more. Direct Line, for example, has calculated that a 1% decrease in the Ogden rate takes £190m off its profits, and the rate has reduced by 3.25 per cent.

Because of this, insurance companies are warning that motor and liability premiums will have to go up for everyone else. Some have estimated that a 22 year old driver might see premiums soar by £1000 a year, though the average increase might be closer to £50-£75.

By and large, it would be fair to say that the insurance industry is not happy with Lynn Truss! Her decision has been described as ‘crazy’. The insurance industry is meeting with the government, and it is possible that lobbying pressure might cause the rate to be changed again, but to one less advantageous to the victim.


How can we help?

If you have been in an accident and think that you should receive compensation for a personal injury then our expert solicitors can help you.


About Taylor Bracewell

Taylor Bracewell operates from offices in Thorne Road and Ten Pound Walk in Doncaster and Fountain Precinct in Sheffield. Specialist areas are: Family Law, Business Law, Personal Law (including Wills, Probate, Trusts and Conveyancing), Dispute Resolution, HR & Employment Law, Charity Law.

You can contact us at or call us on 01302 341 414 in Doncaster or 0114 272 1884 in Sheffield.

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