Proposed government changes could bring an end to the seemingly endless rise in car insurance costs.
New proposals will result in a major U-turn in the Ogden rate, the rate at which compensations are made to victims of serious accidents, which is also known as the Ogden Rate.
In an effort to make the system more fair, the Ogden rate will be modified as soon as next year.
What is the Ogden Rate? Set by the government, it is the amount that victims of life-changing injuries are entitled to after an accident.
The rate was set at 2.5%. This meant that for every PS1,000 awarded in a case, the insurer would pay PS975 and the remaining 2.5% or Ogden rate would be earned by the claimant via investment interest. They would receive the entire amount due.
March 2017 saw the rate drop to -0.75%. In a monetary sense, this means that insurers will now pay PS1,007.50 to victims for every PS1,000 payment.
This increase in payouts is what caused car insurance prices in the past 12 months to reach record highs.
What is the most recent Ogden rate change.
Although no specific date has been set, the Ministry of Justice confirmed that they were revising the rules. It is expected that the Ogden Rate will be 1% by next year.
Insurers welcome the changes as they will be able to reduce the amount that they have to pay.
Huw Evans, Association of British Insurers, commented on the changes proposed:
“This reform proposal is welcome to provide a personal injury discount rate that’s fairer for claimants and customers as well as taxpayers. “
It will be a cost-saving measure that can only be implemented if it is successful. “
What does this mean for drivers?
Rates were last changed in the past. This meant that car insurance premiums increased as insurers passed additional costs onto drivers.
With victims’ pay-outs expected to fall, it makes sense that drivers will benefit from the cost savings by having their coverage reduced.
These changes are not expected to take effect until next year, so it could be some time before you can see the savings on annual insurance.
What will it mean for accident victims?
It’s good news for drivers, but it could also mean that victims of serious accidents with life-altering injuries may not be as fortunate.
Victims will no longer be eligible for the entire amount of the award pay-out. Instead, they will have to make investments in order to earn profit.
Although it is assumed that these people will be in a position to make up the difference easily, many have commented on the unfairness and unfairness of this new rate.
Brett Dixon, president of the Association of Personal Injury Lawyers, spoke to The Mirror.
“A person with a severe, permanent injury like brain damage or spinal injury cannot afford to take risks about how their compensation is invested.”
People with severe injuries should not think about their insurance premiums while they’re in hospital. They consider how they will manage. Customers will be able to benefit from a higher discount rate by increasing their premiums, according to insurers. If they are seriously injured or have to take on the risk of not receiving the compensation they need, it is no benefit. “
Four ways to lower the cost of car insurance
You don’t have to wait for rates changes to lower your cost, but there are many ways that you can save money now.
Reduce your risk
There are certain details that you cannot change but there are some things you can do. Simple things like changing your title from office manager to office administrator can save you money.
Also, you need to think about the vehicle that you are driving. You should choose a car that is safer, faster, and less distracting when choosing one.
Increase your excess
Your premium will be reduced if your willingness to pay more if you are in an accident. This is a great way of reducing the overall cost, but you shouldn’t agree to a premium you cannot afford.
Make sure that your car is safe
You can increase your vehicle’s security by adding an immobiliser or locking it in a garage overnight. This will make your vehicle less appealing to thieves and reduce the cost of your insurance.
Your insurer should know that you have improved your security. Some providers offer discounts even before your renewal.
You only pay for the coverage you require
An annual insurance policy is not necessary if you are borrowing a car, or only need to drive for a few hours.
Temporary insurance is a cheaper option that provides the same financial protection and coverage as annual insurance, but at a fraction the cost.
You can get the coverage you need without paying for unnecessary insurance. It takes only minutes to get multiple quotes and you can compare prices to save money.
