Baca Juga : Car Insurance Costs Are Cut, But It's Not Good News for Everyone
The seemingly never-ending rise in car insurance prices could be coming to a screeching stop thanks to proposed government changes.
New proposals will see a huge U-turn on the rate at which payouts for victims of serious accidents is calculated which is known as the Ogden rate.
The Ogden rate is set to be changed as soon as next year in a bid to provide a "fairer" system.
How does the Ogden rate work?
Set by the government, the Ogden rate is the amount awarded to victims with life-changing injuries after an accident.
The rate had been set at 2.5% which meant that for every £1,000 awarded to a victim in a claim, the insurer would pay out £975 - with the other 2.5% or the Ogden rate expected to be earned by the claimant through investment interest. This would then give them the full pay out they were due.
In March 2017, the rate was cut to -0.75% or in a monetary sense, insurers would now have to pay victims £1,007.50 per £1,000 payment.
It was this increase in pay outs that helped cause car insurance prices to hit record highs* in the last 12 months.
What's the latest Ogden rate change?
While a specific date hasn't been announced, the Ministry of Justice have confirmed that they are revising the rules and it's expected that the Ogden rate will be put at 1% from next year.
The changes have been welcomed by insurers as it will reduce the amount they are forced to pay.
Huw Evans of the Association of British Insurers commented on the proposed changes:
"This is a welcome reform proposal to deliver a personal injury discount rate that is fairer for claimants, customers and taxpayers alike."
"If implemented it will help relieve some of the cost pressures on motor and liability insurance in a way that can only benefit customers."
What do these changes mean for drivers?
The last time rates changed it meant an increase in car insurance premiums as insurers passed on the extra costs to drivers.
Now with pay-outs to victims expect to drop, it only makes sense that the savings will be passed on to drivers by reducing the overall cost of their cover.
Changes are not expected to come into effect until next year so it may be some time before these savings can actually be seen on the price of annual insurance.
Article Source: http://EzineArticles.com/9791565
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