A new Government ruling could see average car insurance premiums rise, thanks to the way people with long-term injuries will now get compensation.
According to some industry experts, motorists could see premiums rise by as much as £75 a year because of the ruling. This is because insurers are likely to have to pay out more in compensation, so they’ll increase the cost of premiums.
Let’s take a look at what the Government ruling is, what it means for your motor insurance premiums and how you can make sure you still get a good deal on your car insurance.
What is the ruling?
The Government ruling is for people who suffer long-term injuries in an accident. Anyone who should get compensation usually gets this as a one-off amount. And if their injuries are serious and likely to affect them for the rest of their lives, this payment is supposed to be able to support them for a long time.
Those who get one of these payments for the long-term usually invest it – so payouts are actually lower to deduct the interest they can expect to get.
Currently payouts fall by 2.5% – this is the Discount Rate. But now the Government has decided that as people will have to rely on their payouts, they should get more money. And the existing Discount Rate assumes that claimants will invest their payout in Government bonds – and when you take inflation into account this actually means they’ll get a negative return on these.
This means the Government has decided to reduce the Discount Rate to minus 0.75% from the end of this month. If you’re an accident victim, this ruling means you’ll actually get a bigger compensation payout. But it’s also likely to have a negative effect on the cost of car insurance premiums.
Chancellor Philip Hammond said the Government will look at the Discount Rate to make sure it won’t affect the price that motorists have to pay for car insurance. But there’s no word yet as to whether this will actually change anything before the Discount Rate reduces on 20 March.
What could it mean for you?
As the costs of claims will go up, this means that insurers are likely to increase the price of motor insurance premiums, as well as the cost of some business insurance. So this means that even if you’re not an accident victim, this new ruling could affect your insurance.
When it comes time to renew your car insurance, remember that you don’t have to just accept the price your insurer quotes you. Look around to see what’s on offer from other insurers, and you can use price comparison sites like uSwitch and MoneySuperMarket to compare what’s available. You can also read our blog to find out how to reduce the cost of your car insurance.
Remember, you don’t have to put up with your car insurance premiums rising. You can get a quote through thinkmoney insurance – we’ll compare deals available our panel of lenders to find a policy that’s right for you.