Drivers are set to see car insurance premiums decrease across England and Wales after a Government policy was changed for the first time in five years.
The savings follow a report by the Government Actuary which was announced today and saw new Personal Injury Discount Rates (PIDR) unveiled.
The PIDR is used to determine lump sum damages awards to people who suffer serious and long-term personal injury, which influence insurers when setting prices for premiums.
The rates are intended to provide people with full and fair financial compensation for all expected losses and costs caused by their injuries, according to the actuary site.
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The ABI detailed how car insurance premiums in the third quarter of the year were down two per cent
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Accountancy firm PwC said it expects motor insurance premiums in England and Wales to decrease by roughly five per cent as a result with drivers set to save £50.
The rate set by the actuary will change from -0.25 per cent to 0.5 per cent and follows a similar move in Scotland and Northern Ireland rolled out in September.
The statutory interest rate, which is reviewed and set by the Government once every five years, is calculated based on the “investment returns a claimant could generate from investing a compensation payment over a lifetime”.
PwC said: “The interest rate environment has changed dramatically since 2019, meaning claimants should see the same returns now from investing a smaller lump sum as they would have done five years ago with a larger sum.”
Mohammad Khan, head of general insurance at PwC UK, explained that the increase in the Personal Injury Discount Rate should bring some consistency to “aspects of how motor insurance premiums and payouts are calculated across the UK”.
He stated that this change is “good news for drivers” as it will “further intensify” the competitiveness of the motor insurance market.
The changes come at a crucial time when premiums for drivers have risen by over 20 per cent in the last two years, but Khan noted that this direction of travel has been “turning and these amounts are starting to reduce”.
He added: “As for the insurance companies, they had expected a change of this scale and will already be pricing it into their pricing.”
Last month, the Association of British Insurers (ABI) detailed how car insurance premiums fell by two per cent from July to September to £612.
The report found that during the three-month period, insurers paid out £2.9billion for car insurance claims, which was 14 per cent more than last year when £2.5billion was paid out.
A spokesperson for the ABI told GB News: “The setting of the new Personal Injury Discount Rate is welcome and something that we have called on as part of our 10-Point Roadmap on Motor Affordability.
“The move to a positive rate reflects the improved investment market conditions since the rate was last set five years ago. We and our members firmly believe in full and fair compensation for claimants.”
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However, the spokesperson noted that the Lord Chancellor’s approach embeds “significant caution into the calculation which could lead to over-compensation”.
The ABI warned that this could have an “adverse impact” on all premium-paying customers, particularly young drivers who still typically pay higher car insurance prices.
