Everything you need to know on the changes
Car insurance prices are set to increase by an average of £60 a year, the cost to younger drivers could go up by £107 a year, this is due to changes to the formula which calculates injury compensation payments.
The insurance industry says it’s a “crazy decision” made by the Ministry of Justice.
This move will reduce the so-called discount rate and could also cost the Department of Health a massive £1bn.
When any victim involved in an accident is given compensation in one big payment, the discount rate reduces a person’s pay-out.
The Ministry of Justice has made the decision to decrease the discount rate from 2.5 per cent to minus 0.75 per cent.
Huw Evans, Association of British Insurers (ABI) director-general, said: “Claims costs will soar, making it inevitable that there will be an increase in motor and liability premiums for millions of drivers and businesses across the UK. We estimate that up to 36m individual and business motor insurance policies could be affected in order to over-compensate a few thousand claimants a year,”