Bad news: Car insurance is going up Good news: By less than you feared

DRIVERS are set to benefit from a smaller-than-expected rise in car insurance after Ministers unveiled new injury compensation rules yesterday.

The average premium could be about £23 a year less than feared if insurance companies pass on the changes in full.

But experts say families will still be paying some £40 more than they were a year ago because yesterday’s proposals do not fully reverse reforms to compensation rates.

Campaigners welcomed the compromise, which followed a fierce backlash by motorists and insurers, but warned that drivers still face ‘a worryingly steep upward curve for car insurance’. Price comparison website comparethemarket.com said the average premium has jumped nearly 40 per cent to £739 in the past three years.

James Daley of consumer group Fairer Finance said: ‘There is still going to be a hit as a result of these changes.

‘It is going to be felt in drivers’ pockets. But it is not as bad as it might have been.’

Stephen Hester, boss of insurers RSA Group, added: ‘If passed, the benefits will be felt by all our customers, helping to stop the rot of steep rises in premiums.’

Insurance giant LV= pledged to pass the savings on in full. A spokesman said the new system will reduce the cost of insurance at a time when premiums are at ‘record highs’.

Anger over the cost of car insurance stems from changes to the so-called ‘Ogden discount rate’ made in February. The rate was used to calculate the size of pay-offs.

The changes pushed up premiums for millions of drivers as the insurance companies covered their costs.

Kevin Pratt, of MoneySuperMarket, said: ‘Insurers have been quick to blame recent increases in motor insurance premiums on the change to the discount rate. It’s vital that any reforms in their favour are reflected in price reductions without delay.’