Car insurance premiums are set to increase following changes to compensation pay outs.
By Leonie Stanton
Compensation pay-outs for victims of car accidents with life threatening injuries are expected to rise, following the government’s decision to cut the ‘ogden’ discount rate.
Decreasing the rate means that victims of serious accidents will get more compensation, whist drivers have been warned by insurers that premiums will increase to cover costs.
The ogden rate, which was designed to calculate loses such as income as a result of an accident or fatality, has been 2.5 percent since 2001 but will lower to minus 0.75 percent.
RAC Insurance director Mark Godfrey said: “This move will increase the total amount of compensation awarded in every such case and this will instantly increase the cost of motor insurance premiums as insurers pass on the costs.
“This will be exacerbated still further in June when another 2% is added to insurance premium tax. The combined effect of this means that motorists are likely to see their premiums increase by 10% and some parts of the market, notably younger and older drivers, may see substantially higher increases.”
Drivers also face increasing costs as Insurance premium tax (IPT) is set to increase in June 2017, from ten percent to 12.
Insurance premium tax is a tax on general insurance premiums, which is implemented on mechanical/electrical appliances, and some vehicle insurance.
There were 25,160 casualties and serious injuries in over a year period in September 2016.
Jack Kushner, spokesperson for Brake, the road safety charity, said: “Every day, five people in the UK lose their lives through preventable road crashes, and more than 60 are seriously injured.
“A death or serious injury on the road has a long-lasting, devastating impact on an individual, their friends and family.
“It is crucial that families affected by road crashes are provided with the care and support that they need, and are able to receive the proper compensation to access this.”
Lauren Kaufman from Claim Link UK, said: “car insurance premiums are set to raise by 40 percent, but some say they have already increased by 11.6 percent already in 2016. Car insurance is now five times more than train fares which is completely ridiculous.
“People that seek compensation following an accident will be compensated exactly the same no matter what the injury, since the limits for personal injuries were set at £5,000.”
Middle-aged drivers are the most likely to be hit by the insurance increase this month. They are expected to pay 23 percent extra now for premiums than they were 12 months ago.
The average premium for a 60 year old, according to confused.com is £451.
Young drivers continually pay more for insurance and are unlikely to face a price increase.
The average insurance premium for 17 year-olds are over £2,000 according to confused.com.
Men are found to pay more than women for car insurance, as they will face 15 percent increase based on gender alone.