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