Julian Bray Aviation security analyst and broadcaster, suggests the aviation sector will soon be "unwitting collateral damage victims" as Personal injury payouts are expected to soar under changes branded by insurance industry leaders as 'crazy' and 'reckless in the extreme' just announced by Lord Chancellor Liz Truss, to the accepted insurance industry formula traditionally used to calculate compensation sums for life-changing injuries.
The move will affect financial awards given to victims of medical negligence, road traffic collisions, air accidents, railway casualties and other incidents where compensation is involved.
The changes announced by Lord Chancellor Liz Truss will in particular have an acute impact on major public bodies with large compensation bills such as the NHS, and millions of drivers and travellers could also see motoring and travel insurance costs rise.
Private firms, large and small together with PLC's will also be affected as the Corporate Manslaughter Act is already law, and evidence 'legal bundles' collected under that Act could equally be applied to compensatory pay outs.
The measures, delivered on Monday to the London Stock Exchange, relates to a calculation called the Discount Rate, which has been unchanged since 2001.
When victims of life-changing injuries accept lump sum compensation payments, the actual amount they receive is adjusted according to the interest they can expect to earn by investing it.
In finalising the compensation amount, courts routinely apply the Discount Rate, with the percentage linked in law to returns on the lowest risk investments, typically Index Linked Gilts.
Claimants are always treated as risk-averse investors, financially dependent on the lump sum, often for long periods or the duration of their life.
Awards using the rate should put them in the same financial position had they not been injured, taking into account loss of future earnings and care costs.
From March 20th 2017, the Discount Rate will fall from 2.5% to minus 0.75%.
As well as seeing compensation payments rise, the decision will have a possibly not foreseen knock-on effect on public services with large personal injury liabilities such as the NHS, which saw clinical negligence costs in England rise from £1.2 billion in 2014/15 to £1.5 billion the following year.
The move is also likely to have a significant impact on the insurance industry.
Huw Evans, director general of the Association of British Insurers, called the decision "crazy" and "reckless in the extreme".
He added: "Cutting the discount rate to minus 0.75% from 2.5% is a crazy decision by Liz Truss.
"Claims costs will soar, making it inevitable that there will be an increase in motor and liability premiums for millions of drivers and businesses across the UK.
"We estimate that up to 36 million individual and business motor insurance policies could be affected in order to over-compensate a few thousand claimants a year."
Ms Truss is also Justice Secretary, but made the decision in her capacity as independent Lord Chancellor.
She said: "The law is absolutely clear, as Lord Chancellor, I must make sure the right rate is set to compensate claimants. I am clear that this is the only legally acceptable rate I can set."
The Government meanwhile says it will ensure the NHS Litigation Authority has additional appropriate funding to cover changes to hospitals' clinical negligence costs, while the Department of Health will work closely with GPs.
Ministers will also launch a consultation to consider whether there is a better or fairer framework for claimants and defenders, and Chancellor Philip Hammond will meet representatives of the insurance industry to assess the impact of the rate adjustment.
Whatever happens, it marks an upcoming bonanza for ambulance chasers, 'no win, no fee' (contingency) class action lawyers, and insurance brokers...
JULIAN BRAY +44(0)1733 345581, Journalist & Broadcaster, Aviation Security & Airline Operations Analyst/expert, www.freelancedirectory.org?name=Julian.Bray.aviation.comment, Travel / Maritime & Cruise Industry, NUJ, EQUITY, LIVE ISDN LINK, Broadcast ISDN COOBE ++44 (0)1733 345020 e&oe Old faithful NOKIA: 07944 217476 www.aviationcomment.com
No comments:
Post a comment