Average car insurance premiums are set to rise by up to £75 as a result of a new government ruling, industry experts expressed. We know what you’re all thinking, insurance is considered to be way too expensive already.
The ministry of Justice has announced a new formula that insurance companies will be using that to calculate compensation payments for people who suffer long-term injuries. This new formula however has been dubbed as ‘crazy’ by the Association of British Insurers, (ABI).
In response the Ministry of Justice has stated they had no choice due to the current law, and that it does aim to consult these possible changes. The announcements have caused a severe drop in shares in insurance companies, with some stating that their profits could be hit by millions of pounds.
The courts currently take 2.5 percent off compensation awards to reflect the interest earned by a victim once they put the lump sum into their bank.
As of March 20, this rate drops to -0.75 percent, causing insurers and public sectors such as the NHS to come invest more.
Justice Secretary Liz Truss said: “There will clearly be significant implications across the public and private sector.”
PWC General Insurance Chief, Mohammad Khan, said: “This announcement will have a significant adverse impact on motor insurance prices that drivers pay and also commercial insurance rates paid by small businesses.
“As a direct result of this change, we anticipate an increase of £50 to £75 on an average comprehensive motor insurance policy.
“But there could be higher increases for young and older drivers – potentially up to £1,000 for younger 18-to-22 year-old drivers – and a rise of up to £300 for older over 65 year-old drivers.”
The change is due to take effect from 20 March.
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