Drivers facing even higher premiums
Motor insurance premiums could soar by a further £75 as a result of government changes to injury payouts.
The government announced yesterday that the discount rate would be cut from 2.5% to -0.75% as of 20 March, a decision which stunned the insurance industry.
Compensation payouts are adjusted according to the interest claimants can expect to receive by investing the money. With interest rates so low, the government says claimants won’t earn as much interest as before, meaning insurers will have to make up the difference.
The Association of British Insurers has labelled the move crazy and warned that 36 million motorists will pay higher premiums as a result. According to PwC, the average increase will be £50-£75, although drivers aged between 18 and 22 could see their annual rates shoot up by £1,000.
Drivers over 65 could see their premiums rise by up to £300.
Mohammad Khan, UK general insurance leader at accountancy PwC, said, ‘This announcement, on top of the recent increases in insurance premium tax, will make redundant any savings to premiums as a result of the government’s personal injury legal reforms which were anticipated to generate approximately £40 saving per motor insurance policy.’