Car insurance costs to rise by up to £75 a year after rule change
DRIVERS could have to stump up £75 a year more for car insurance following a rule change to how much insurers pay out for serious claims.
These potential hikes have been caused by a shake-up to what's known as the "Ogden rate".
This is a calculation used by the government to decide how much insurers should pay out to people who suffer long-term or serious injuries.
The rate has fallen this week from -0.75 per cent to -0.25 per cent, which actually means insurers have to pay out less than before.
So a £10,000 claim, for example, will now see insurers pay out £10,025 to claimants down from £10,075.
But industry experts say insurers had been expecting a much larger rate cut, which means they'll have to hike car insurance premiums to recover costs.
Huw Evans, director general of trade body the Association of British Insurers (ABI) said: “This is a bad outcome for insurance customers and taxpayers that will add costs rather than save customers money."
Mohammad Khan, general insurance leader and partner at accountancy firm PwC, reckons the change could see between £50 and £75 a year to younger drivers' premiums.
While average costs could be hiked by between £25 and £50.
He said: "The announcement means that motor insurance premiums - which have been broadly stable this year and slightly lower than last year - will probably increase.
"The average motor insurance premium will probably increase by between £15 and £25 but younger drivers may see their premiums increase by about £50 to £75."
Average car insurance prices currently stand at £466 a year, according to the latest data from the ABI.
Changes to car insurance tax have already cost drivers more than £200 each over the last four years.
But here's how to lower your premiums and get cashback.
Plus, here's how fuel and insurance can affect the price of holiday car hire - and how you can keep costs down.
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