Insurance hike rule change starts today

20 March 2017

Motorists will see their premiums rise by as much as £100 a year after changes to compensation payout rules take force today.

The change, which was announced by Lord Chancellor Liz Truss and reported by Moneywise in February, is occurring due to a change to the Ogden rate. This is used to work out how much money a claimant should receive once inflation and future interest are taken into account. Because government bonds are currently returning negative rates once inflation is included, the rate has changed from 2.5% to -0.75%.

What this means is that insurers will have to pay out more – an extra 0.75% on top of a lump sum, rather than taking away 2.5% as they did up until today. So while victims will get more, insurers are likely to recoup these extra costs from all insurance customers.


Insurance analyst, Consumer Intelligence, estimates that motorists will see their car insurance premiums rise by up to £100 per year.

Kevin Pratt, consumer affairs expert at MoneySupermarket, says: “The cut in the discount rate applied to personal injury pay-outs has sent shockwaves through the insurance industry. Following the announcement, insurers were quick to say that the fall-out would be felt swiftly and heavily by car insurance customers. An annual premium increase of around £70 per policy has been mooted, with hikes of up to £1,000 a year suggested for young, high-risk drivers.”

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