Commenting on the Ogden discount rate announced today and its impact on the insurance market and pricing of motor insurance.
Mohammad Khan, General Insurance Leader and partner at PwC, said:
"The insurance industry will broadly welcome the announcement this morning from the Lord Chancellor, David Gauke, on the increase to the Ogden discount rate to -0.25% from -0.75%.
"The Ogden discount rate affects the amount paid by insurers for payouts for people with long-term severe injuries - the lower the Ogden discount rate, the higher the compensation due to policyholders.
"Ever since the announcement from Government to review the discount rate back in September 2017, the insurance industry expected the Ogden discount rate to increase from -0.75% and has consequently been pricing motor insurance and settling insurance claims at a rate higher than -0.75% - typically between 0% and 1%.
"In real terms, this means that UK motorists have been paying lower insurance premiums compared to what the industry could have charged them if they assumed the Ogden discount rate was -0.75%.
"The announcement today means that motor insurance premiums - which have been broadly stable this year and slightly lower than last year - will probably increase. The average motor insurance premium will probably increase by between £15 and £25 but younger drivers may see their premiums increase by about £50 to £75."
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