Who’d be a driver? Insurance premiums could now rise 50%

DRIVERS could see car insurance premiums leap by 50 per cent under plans to increase compensation payouts.

Ambulance-chasing law firms are lobbying ministers to force insurers to give bigger payouts to victims of serious accidents.

They want Justice Secretary Liz Truss to introduce a new rate to significantly increase the cash given to people left permanently disabled and unable to work.

It would also net larger fees for law firms and blow a massive hole in insurers’ accounts, which could add more than £230 a year to the premium of a typical driver.

Small businesses could also be hit as the changes would also increase the costs of work-related injuries. The revelations come as car insurance premiums have already hit their highest ever level.

Yesterday it was revealed that premiums rose by 4.9 per cent in the last three months of 2016, adding £22 to the average fee. Insurers blamed the rise on a surge in whiplash claims and continuing increases to the Government’s insurance premium tax.

Justin Modray, of consumer group Candid Money, said: ‘It’s very important people who suffer serious injuries are properly compensated, but any significant increase could massively hit premiums.

‘In the US, lawyers tend to run away with claims and compensation costs are out of control. I’d hate to see that happen here.’

The average driver pays a record high of £462 a year, meaning a 50 per cent rise would cost them an extra £231.The Association of British Insurers (ABI) said that young drivers, whose premiums are often well above £1,000, could be hit hardest because most of the cost covers protecting drivers from the risk of a major accident or whiplash claim. People who suffer life-changing injuries because of accidents when driving or at work, and are unable to carry on their job, are compensated by insurers for loss of future earnings.

This comes out of funds the insurance companies raise by selling premiums to customers.

The exact amount paid is worked out using a rate called the Ogden discount, which is set by Mrs Truss. The higher this is, the less money accident victims get.

The discount rate determines how much money insurers can shave off a compensation payout to account for how much the claimant could earn by investing that lump sum. The present 2.5 per cent rate has not moved since 2001 but the Association of Personal Injury Lawyers (APIL) wants it changed to between 0.5 and 1 per cent, leading to bigger payouts.

APIL president Neil Sugarman said: ‘Insurers have got away with under-compensating people with catastrophic injuries for years. The ABI’s excuses do not wash.’

An insurance industry source said that motorists and small business owners could also suffer punishing price hikes as a result.

‘Small and medium companies could see their liability insurance premiums rocket,’ he said.

‘Young drivers could see rates surge. Premium increases of even 50 per cent could be on the cards.’

Mrs Truss, who is also Lord Chancellor, launched a review of the discount in December in the face of legal action by APIL.

She is expected to make an announcement on the rate later this month.

‘Their excuses do not wash’