Car insurance prices likely to rise by around £75 for UK motorists
Government changes to injury payouts being blamed for the increase which will affect millions of drivers in the UK
Car insurance premiums are set to rise for millions of motorists in the UK as a result of Government changes to personal injury payouts.
Many experts are anticipating that the new changes will increase the price of an average insurance policy by around £60-£75.
Drivers aged 65 or over could end up paying an extra £300 for insurance cover but it’s the younger drivers who’ll suffer the most as a result of these changes, with experts predicting that their insurance premiums will rise by around £1,000.
An announcement by the Ministry of Justice, confirmed that the current discount rate used to calculate how much compensation is paid out in the case of a personal injury claim, is to be cut from 2.5% to minus 0.75%.
The calculation, which is known as the Ogden discount, was invented to ensure that claimants are not over or under paid and has remained, up until now, the same since 2001.
The new lower rate will come into effect on March 20 this year. As a result of the changes, insurers will be paying out more for compensation claims, meaning car insurance policy price increases for motorists.
The changes have been described as “crazy” by the Association of British Insurers (ABI), stating that the cost of claims will climb and as such, will result in an increase in motor and liability premiums for millions of drivers throughout the country.
According to ABI, the changes will affect motorists who are more often than not involved in accidents that lead to an injury payout, specifically older drivers and the young.
Along with rising prices for motorists and insurers, public services who pay out compensation, such as the NHS, will also lose out, with the ABI estimating that their compensation bills could increase by around £1 billion.
The Ministry of Justice have said that their reasoning behind the lowering was down to the old method, in place since 2001, being based on interest acquired from investing in Government bonds.
However, when inflation is taken into consideration, the bond returns would have been negative, so the rate was adjusted so that: “Compensation awards using the rate should put the claimant in the same financial position had they not been injured, including loss of future earnings and care costs.”