This morning, the Ministry of Justice announced draft legislation to change the so-called “Ogden discount rate”, which is used to calculate personal injury claims awards.
Commenting on the announcement Mohammad Khan, UK general insurance leader at PwC, said this announcement by Lord Chancellor David Lidlington, could help prevent another steep rise in motor insurance premiums:
"This morning's announcement by the Ministry of Justice should bring some relief to motorists. Premiums had already risen by about £75 on average and about £250 for young drivers following the original discount rate announcement earlier in the year as insurers passed on roughly half of the expected costs caused by the original rate move.
"If this morning's announcement had not been made, insurers would have been forced to pass on the remaining costs and annual motor insurance premiums would have risen again in November and December by an average of £100 for UK motorists and by between £300 and £500 for young drivers.
"As a result, today's announcement, if passed through Parliament, should mean that motor insurance rates remain stable for the next six months. However, if the legislation is not passed, it could mean motorists facing steep premium rate rises early next year."
"The announcement will also be welcomed by motor insurers, some of whose results at the half year were adversely affected by Ogden. If passed before the year end, it should bring some relief to motor insurers."