Insurance prices to fall after Government revises changes payouts to victims

Government forced to change the Odgen rate following insurance industry backlash

Happy drivers, happy motorists, young drivers, learner

Motorists can look forward to cheaper car insurance after the Government agreed to revise its compensation payout rate following a public backlash over changes proposed earlier this year.

In February, the Ministry of Justice announced it would cut the “Odgen rate” that's used to calculate compensation payouts from 2.5 per cent to -0.75 per cent from 20 March onwards. When accident victims are given large compensation payments by insurers, the sum is discounted to take into account the extra interest they could earn from investing it. With a  -0.75 per cent rate insurers pay more for compensation claims, which in turn increases premiums for motorists. 

Estimates by financial analysts PricewaterhouseCoopers found the average insurance price went up by £75 as a result, with young drivers seeing hikes of £250.

• Cheap car insurance for young drivers: top tips

Following backlash from both the insurance industry which called the move "crazy" and the public, Chancellor Philip Hammond announced in March that he would reconsider the changes in the rate. The Government has now proposed to change the way the rate is calculated from being based on "very low risk" to "low risk" investments, placing the actual rate somewhere "in the region of 0 to 1 per cent." 

Tony Sault, UK general insurance leader for consultancy EY said: "We would expect the recent rise in premiums to level off in anticipation of the new legislation and ultimately premiums could fall between two and four per cent, saving up to £21 on the average premium." 

• Car insurance prices hit record high levels

Huw Evans, director general of the Association of British Insurers said: “This is a welcome reform proposal to deliver a personal injury discount rate that is fairer for claimants, customers and taxpayers alike. The reforms would see the discount rate better reflect how claimants actually invest their compensation in reality and will provide a sound basis for setting the rate in the future. If implemented it will help relieve some of the cost pressures on motor and liability insurance in a way that can only benefit customers.”

Do you welcome the proposed changes by the Government? Tell us in the comments below... 

Recommended

Pay-per-mile road pricing no longer politically toxic, study suggests
Motorway
News

Pay-per-mile road pricing no longer politically toxic, study suggests

The Social Market Foundation says fuel duty unfairness opens the door for road pricing schemes
15 Oct 2021
Transport secretary Grant Shapps confirms digital driving licences are on the way
Digital driving licence
Consumer news

Transport secretary Grant Shapps confirms digital driving licences are on the way

DVLA plans to offer a digital provisional driving licence by 2024, with full digital licences to follow at a later date
17 Sep 2021
Electric car charge points to be installed in every new home in the UK
Home charging point
News

Electric car charge points to be installed in every new home in the UK

England will be the first country in the world to introduce mandatory electric car charging points for new-build homes
10 Sep 2021
Government asks for more Smart Motorway safety data with revised Highway Code on the way
smart motorway
News

Government asks for more Smart Motorway safety data with revised Highway Code on the way

A revised version of the Highway Code will cover Smart Motorway driving, as National Highways pledges to improve data and monitoring
8 Sep 2021

Most Popular

Nissan launches combined PCP finance deal for electric car and charger
Nissan Leaf
Nissan

Nissan launches combined PCP finance deal for electric car and charger

The unusual new offer is available on the Nissan Leaf and e-NV200 van – and it includes the cost of installing the wallbox charger at your home
13 Oct 2021
New Ford Focus unveiled with 2021 facelift and tech updates
Ford Focus ST Line - front
Ford Focus Hatchback

New Ford Focus unveiled with 2021 facelift and tech updates

Ford has given the Focus hatchback a refresh for 2021, with a new design and an improved infotainment suite
14 Oct 2021
All-new 2022 Ford Tourneo Connect unveiled
Ford Tourneo Connect MPV
Ford Tourneo Connect MPV

All-new 2022 Ford Tourneo Connect unveiled

Ford’s new Tourneo Connect is the first product of the company’s tie-in with Volkswagen, so it shares most of its parts with the latest Caddy
12 Oct 2021