Drivers to face severe insurance premium hikes

Friday, March 3, 2017

 

Young people could be in danger of being priced out of owning a car after insurers warned their annual premiums could rise by up to £1,000.

 

Drivers aged over 65 could also face an extra £300 charge, while the average comprehensive motor insurance policy could increase by up to £75 a year to cope with changes the Government has made to personal injury payouts.

 

The government says it is the only “legally acceptable” course of action available.

 

Others in the insurance industry have labelled the changes announced by Lord Chancellor Liz Truss as “astonishing, “crazy” and “reckless in the extreme”. 

 

She announced that those affected by medical negligence, car crashes and other incidents will get more money after changes to the way lump sum payouts are calculated.

 

However, the move will put increasing pressure on insurers, the NHS and other public bodies who are responsible for paying out the increased claims.

 

The amount victims receive when accepting lump sum payments is adjusted according to the interest they can expect to earn by investing it.

 

Basically, this means car insurance premiums could initially rise by an average of at least 8%, or £60, this year – with further hikes likely.

 

The Ogden rate reform could mean an increase of around £123.51 for the 17-20 age group, sending their average premium to £1,654.58.

 

Mohammad Khan, UK general insurance leader at PwC, said the change will see costs for driver rise.

 

He said: “Unfortunately, this announcement will have a significant adverse impact on motor insurance prices that drivers pay and also commercial insurance rates paid by small businesses.

 

“As a direct result of this change, we anticipate an increase of £50-£75 on an average comprehensive motor insurance policy, with higher increases for younger and older drivers – potentially up to £1,000 for younger drivers (18-22 year olds) and a rise of up to £300 for older drivers (over 65 years old).

 

“The announcement, on top of the recent increases in insurance premium tax, will make redundant any savings to premiums as a result of the government’s personal injury legal reforms which were anticipated to generate approximately £40 saving per motor insurance policy”. 

 

He added: “Due to the competitive nature of the insurance industry, policyholders should be able to reduce any impact by shopping around but younger and older drivers will see significant price increases regardless.

 

“The announcement will also impact reinsurance pricing by pushing prices up for motor and liability reinsurance cover.

 

“This may impact the business models of companies that rely on low layers of reinsurance who will be faced with much higher costs of doing business after they renew their reinsurance”.

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