The AA has welcomed the Government’s announcement
that it will put new legislation before Parliament today (7
September) which could see the so-called Discount or ‘Ogden’ rate
re-set.
This rate which had been unchanged at 2.5% since 2000
was reduced to minus 0.75% in March. It affects the amount
of compensation that is paid by insurers to those suffering
injury in car crashes and the rate cut cost UK insurers hundreds
of millions of pounds in higher claims costs and additional
reserves to meet future claims.
The change particularly affected young drivers who
are involved in more frequent and more costly injury claims and
who have seen their premiums rise at a much sharper rate than
average. The AA has expressed concern that unaffordable
premiums are responsible for the recent increase in young,
uninsured drivers.
Michael Lloyd, the AA’s director of
insurance gave the decision a cautious welcome but
said: “The new rate must be adjusted to set a realistic and
fair rate for both victims and insurers.
“This draft legislation is being put before
parliament today, but there’s no guarantee that it will be
enacted. And the new rate won’t be retrospective so current
claims will continue to be paid under the current
legislation.
“Premiums have increased sharply for
everyone.
“Over the second quarter of 2017, the average quoted
Shoparound premium according to the AA’s British Insurance
Premium Index, rose by 8.3%. Young drivers (17-22) – who
already pay more for their insurance than anyone else, saw their
premiums jump by 10.6% to an average of £1,771 and by more than
22% in 12 months.
“The premium for a new teenage driver can be an
eye-watering £3,000 or more.
“We predicted in July that as a consequence of these
entirely avoidable government-prompted increases including a
doubling of Insurance Premium Tax over the past couple of years,
more young drivers would risk illegal ways of getting behind the
wheel and sadly, that has come to pass.
“We need decisive action to help young drivers take
to the road safely and legally and we have repeatedly called for
IPT to be abolished for young drivers during their first two
years of driving, assuming they keep their licence clean, and for
all young drivers who adopt telematics or ‘black box’ insurance
which monitors their driving behaviour.
“I look forward to seeing how the detail of the new
legislation, if it is passed, will work in
practice.”
