Car insurance premiums could rise by an average of £75 if government plans to change the personal injury discount rate go ahead.
The personal injury discount rate calculates how much money is removed from a victim’s insurance payout following an accident, in order to make up for money made should the money be invested over several years.
According to the Association of British Insurers, Lord Chancellor Liz Truss’s proposal to cut the rate from 2.5% to -0.75% will cause claim costs to soar, leading to “an increase in motor and liability premiums for millions of drivers and businesses across the UK”.
It labelled the change as ‘crazy’ and said that 36 million individuals and businesses could be affected.
ABI director Huw Evans said, “To make such a significant change to the rate using a broken formula is reckless in the extreme, and shows an utter disregard for the impact this will have on consumers, businesses and the wider operation of the insurance market.