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Compensation payout review results in young driver insurance hike

Monday 27 February 2017, By Autovolo

Compensation payout review results in young driver insurance hike

Compensation payout review results in young driver insurance hike

A government review of accident compensation payouts will have the worst effect on young drivers.

The Ministry of Justice reviewed the Ogden rate – the formula used to calculate payouts to personal injury claimants – following requests from law firms. They had called for larger compensation for crash victims as that would allow them to increase their own fees.

A consultation on the rate happened in December but an announcement on changes to the rate was not made until this morning. The Ogden rate was reduced from 2.5 per cent to minus 0.75 per cent.

As a result, the average car insurance premium is expected to rise by 8.07 per cent, or £60, in 2017.

Young drivers are already paying the highest premiums and will face the highest increases of any age group. In 2016, the average 17-20-year-old paid £1,531 per year to insure their vehicle, but that is set to increase by £123.51 to  £1654.58.

The 17-24 age group will see an average rise of £107.34, taking premiums up to £1,438. Meanwhile, drivers aged 65 to 79 will see the smallest increase, with premiums rising just £26.39 to an average of £353.54.

Simon McCulloch, director of comparethemarket.com, expressed outrage at the reform.

“The Ogden discount rate has been changed in a far more drastic way to what insurers had been expecting and motorists will feel the effects through sharp increases to their premiums,” he said.

“Premiums could increase on average by almost £60. However,? those that can probably least afford it will be hit hardest.

“The concern is that the discount rate change will see much of the money move from the pockets of motorists and into those of personal injury lawyers, who campaigned for it. The government should find a way of ensuring that all of the additional benefit goes to legitimate claimants, rather than simply to the lawyers, to achieve the purpose of the changes without unduly burdening motorists with further unnecessary insurance hikes.”