The average price of motor insurance has hit its highest level in five years, according to figures from the Association of British Insurers (ABI). Premiums stood at £485 during the third quarter this year, more than 10% higher than the same period in 2016.
Analysts have said the government’s decision to cut the Ogden rate may have stoked the rise. The figure refers to the discount rate used in calculating compensation payments for personal injury claims – it was adjusted last February from 2.5% to -0.75%.
The cut contributed to increased payouts, denting insurers’ profits and driving premiums to record highs,
Reuters reported. Insurance Premium Tax also went up from 10% to 12% last June.
The government announced last month plans to change the rate, which could lead to smaller payouts.
“The UK Government’s proposals to deliver a personal injury compensation system that is fair for claimants, customers and taxpayers alike should help ease the pressure on motor insurance premiums,” said Rob Cummings, ABI head of motor and liability as quoted by
Reuters.
During second quarter, the average price paid for private comprehensive motor insurance was £484, an increase of £22 (4.8%) on the first quarter of the year when average premiums were £462, the ABI said.
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