MOTOR INSURANCE SET TO RISE BY £75
Policy hike fears after rule change
AVERAGE car insurance is likely to go up by £75 a year after Government changes to payouts for crash victims. Insurers’ payments to those with lifechanging injuries are reduced to account for the interest the lump sums can earn. But from March 20 the Ministry of Justice has cut this discount rate from 2.5% to minus 0.75%. The negative interest rate means insurers will have to fork out higher payments. It is feared the firms will claw back the money through bigger premiums. Critics warned the change will cost insurers £850million more a year, plus £5.8billion to recalculate past claims. Accountants PWC predict average motor premiums will rise from £450 to about £525 but over 65s’ policies will go from £400 to £700 and 18 to 22-year-old drivers’ from £1,300 to £2,300. The Association of British Insurers branded the changes “crazy”. Its director general Huw Evans said: “We estimate up to 36 million individual and business motor insurance policies could be affected in order to over-compensate a few thousand claimants a year.” However, others predicted insurers could use the shake-up as an excuse to raise prices. Ministers will give the NHS an extra £1billion to cover increased compensation payouts. The NHS will be among the public bodies most affected by the ruling due to its huge personal injury liabilities.
A crashed car RISING COVER