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Rethinking the discount rate formula: ensuring just compensation for the severely injured

Rethinking the discount rate formula: ensuring just compensation for the severely injured


APIL urges Ministry of Justice to reconsider discount rate assumptions to align with real-world investment realities

As the Ministry of Justice (MoJ) solicits evidence for its upcoming review on the Setting of the Personal Injury Discount Rate, APIL raises crucial concerns about the current framework's adequacy in providing fair compensation for the severely injured.

Jonathan Scarsbrook, president of APIL, stresses the discrepancy between assumptions and actual investment practices, stressing the need for a recalibration to uphold the principle of 100% compensation mandated by the Civil Liability Act.

The existing discount rate formula, anchored in outdated assumptions, fails to account for the complex financial realities faced by claimants, leading to significant under-compensation for a substantial portion of individuals.

Scarsbrook highlights the practicalities of investment management, including costs associated with discretionary fund managers and escalating tax burdens, which significantly impact the financial outcomes for catastrophic injury claimants.

Contrary to insurance industry assertions, Scarsbrook asserts that setting the discount rate is not a theoretical exercise but a critical determinant of ensuring adequate compensation for individuals grappling with life-altering injuries.

The discount rate review must prioritise the needs of catastrophically injured individuals, recognising that compensation is not a windfall but a lifeline for meeting ongoing financial requirements.

Ultimately, the reassessment of the discount rate formula is imperative to uphold the fundamental principle of justice and ensure that those most in need receive the full and fair compensation they deserve.