As the Government bows to the pressure from insurance companies regarding the size of compensation payouts, drivers could save hundred of pounds in motor insurance costs increases.
Earlier in 2017, the Ministry of Justice decreased the discount or “Ogden” rate from 2.5pc to -0.75pc. As an effect, it boosted the compensation for those harmed in motor accidents, to show historically low interest rates that the victims earn on their cash.
According to PcW, the accountants, premiums on car insurance have already increased by an average of £75, and around £250 for young drivers, As insurers passed on additional expenses to customers, they were expected to increase a further £100, or between £300 and £500 for young drivers.
But experts evaluate that the “Ogden” rate could now be set at between zero and 1pc.
“We want to introduce a new framework based on how claimants actually invest, as well as making sure the rate is reviewed fairly and regularly. In developing our proposals, we have listened carefully to the views of others, and we will continue to engage as we move forward,” said Justice Secretary David Lidington.
The change has been accepted by insurers. Huw Evans, director of the Association of British Insurers, the industry trade body, announced the amended rate would mean “a personal injury discount rate that is fairer for claimants, customers and taxpayers alike”.
“The reforms would see the discount rate better reflect how claimants actually invest their compensation in reality and will provide a sound basis for setting the rate in the future. If implemented it will help relieve some of the cost pressures on motor and liability insurance in a way that can only benefit customers,” Evans said.
UK general insurance leader at PwC, Mohammad Khan, stated: “Today’s announcement if passed through Parliament, should mean that motor insurance rates remain stable for the next six months. However, if the legislation is not passed it could mean motorists facing steep premium rate rises early next year.”