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Government changes to personal injury payouts

vintage first aid box

As you've probably seen in the news, there's been some hubbub about insurance premiums rising due to changes the government are making. The insurance world is FULL of jargon so we thought we'd try to explain what's going on in normal, human words.

What's changing, exactly?

OK. Deep breath.

So, there's this thing called a discount rate. If you're in a crash and you suffer really serious injuries with a long-term impact on your life, the insurer of the person responsible will pay you a sum of money. That sum is intended for your ongoing care.

As you're not expected to spend the lot in one go, the insurer used to be able to pay you less than the official sum because you'd earn interest on it over the years. This is called the discount rate, which has been set at 2.5% for many years.

The massive hoo-hah this week is due to the Ministry of Justice announcing a drop in the discount rate to -0.75% from 20 March 2017. The insurer will therefore have to pay MORE than the official pay-out, because the MoJ reckons your money is likely to be worth less in a few years than it is now.


So... What's that mean?

More money for injured people = great news, right? Sure, but that money has to come from somewhere - hence the controversy in the insurance world.

People with really serious injuries from a crash need to be fully compensated so they can get the support they need to carry on with their lives. The problem is getting the balance right between appropriate pay-outs for them - and affordable insurance for everyone else.

Cutting the discount rate to -0.75% from 2.5% is a crazy decision. Claims costs will soar, making it inevitable that there will be an increase in motor and liability premiums for millions of drivers and businesses across the UK.

Huw Evans
Director General of the Association of British Insurers

Finding affordable insurance is already a challenge for a young driver; they pay the highest premiums around. And let's not forget the Insurance Premium Tax increase that's set to take place in June this year, despite many road safety bodies' campaigning for 0% IPT for drivers with a black box.

But that's why ingenie exists: we're always going to give our community discounts for how well they drive. Whatever else is going on in the world of car insurance, we're committed to making it suck less for young people.

While we don't yet know the full impact these changes will have on insurance prices, we'll be doing everything we can to speak up for you guys.

Katey Gregory

By Katey Gregory

Katey Joined ingenie in 2014 and is in charge of all things social and content. She passed her driving test in 2015 and her first car is a Toyota Yaris T3 named Tyrone.