UK's car insurance premiums on the rise again.
UK's car insurance premiums on the rise again.
For those interested, here's a copy of an article we wrote for the Saab Owners Club GB magazine in early February about the potential for insurance premium increases across the whole market.
"As we move into the year we know that Article 50 will be invoked by the PM and negotiations for our exit from the EU will begin. The EU has been blamed for much of the heavy regulation we see in UK industry. However, without influence from Europe, changes to personal injury claims are likely following a recent review by our own Ministry of Justice (MoJ) that will impact the current easy target – the motorist.
The government has already increased Insurance Premium Tax to 12% (effective from 1st June this year) and the proposed amendments to injury pay-outs are tipped to increase insurance costs further, particularly for those of us driving on the UK’s roads.
Currently, when a personal injury award is made the total is discounted by a factor (known as the Ogden Rate) to account for the expected additional return when the lump sum is invested by the recipient. We’re considering sums here that are awarded to cover loss of earnings, increased life-long care costs for someone majorly affected by an accident or even death. The Ogden Rate is designed to ensure that someone is not under- or over-compensated. At the moment this discount rate is set at 2.5% and it has been at this level since 2001.
The MoJ wants to reduce the discount rate to reflect the current interest rates, meaning that an insurer’s share of any pay-out would increase. The industry body, the Association of British Insurers (ABI), launched a legal challenge to the MoJ’s review in December on the basis that there has not been proper consultation but the High Court rejected the ABI’s concerns. ABI representatives say the reduction comes “at a time of significant global financial uncertainty” and one insurer’s analysis suggests that a 1% decrease in the Ogden Rate would wipe £190 million off its profits. Does this mean that insurers will want to pass on the costs to the policyholder? Most probably.
A decision is imminent, though the 30th January deadline has already been missed and an announcement has been promised, by the Lord Chancellor, for February. One thing’s for sure, this is a hot topic in the industry at the moment and the ramifications for insurers and, potentially, car insurance purchasers are greater than even the tax rise and the MoJ’s whiplash reforms."
On February 27th the Ogden Rate was indeed reduced, from 2.5% to -0.75%. The drop was much bigger than the industry expected and shares in motor insurance firms plummeted on announcement. It now looks like our prediction was correct and rates are beginning to rise across the board.
Rest assured, at Chris Knott Insurance we'll still be doing all we can to find you the best car insurance deals out there. As your existing provider increases their rates please call us to see if we can offer you something better under our privileged club/forum scheme for enthusiasts.
QUOTELINE: 0800 917 2274
Please mention this club/forum or its unique code when you call to ensure you receive the full benefits of the club scheme.
best,
Nick
PS. As an aside, there is equal implication for the NHS as medical malpractice claims also use the Ogden Rate to calculate compensation.
