Car insurance premiums for millions of drivers could rise by £60 to £360 a year by the beginning of 2018.
Tax increases, higher repair bills and a European court ruling will converge to create a perfect storm for Britain’s motorists, new analysis shows.
ERS, the UK’s largest specialist motor insurer, says a key factor behind the 29% rise is the cut to the ‘discount rate’ – an adjustment that is applied to lump sum compensation payments for people who suffer life-changing injuries.
In March this year, the Ministry of Justice slashed the rate from 2.5% to -0.75%, catching the industry by surprise and costing it hundreds of millions of pounds.
[graphiq id=”1TTfRrL3Ayx” title=”Road Casualties in United Kingdom” width=”600″ height=”513″ url=”https://w.graphiq.com/w/1TTfRrL3Ayx” link=”https://www.graphiq.com” link_text=”Visualization by Graphiq” ]
The analysis shows the change will make premiums £21 higher for the average driver and £330 higher for a taxi driver.
Other looming changes include a further hike in Insurance Premium Tax, which Chancellor Philip Hammond announced in March, which will increase from 10% to 12% on June 1.
ERS says the increase will result in an extra £5 for standard drivers and £45 more for commercial drivers.
An expected rise in reinsurance, which insurers take out to protect themselves from large, unexpected claims, is expected to add over £15 to a standard policy and nearly £200 to an average taxi driver’s policy over the next year.
Higher repair costs are also set to increase a standard policy by £15 while a taxi driver will fork out another £127.
This is all before the impact of the European Court of Justice’s ruling in the case of Slovenian Damijan Vnuk, who was injured by a tractor on private land in 2007.
The ECJ ruling could mean compulsory insurance must cover accidents involving a vehicle’s ‘normal function’ – including cars driven on private property. ERS estimates this will drive a further 1% increase in motorist’s policies – an extra £3 for a car driver and £25 more for a taxi driver.
“This is a pivotal year for motor insurance, with a range of factors converging which will translate to higher premiums for every motorist,” said Ian Parker, chief executive of ERS.
“We estimate the combined impact of factors… will lead to price increases of up to 29%, costing drivers hundreds of pounds.
“That increase is a bitter pill to swallow for many people who expect that the cost of their annual motor policy, without a claim, should decrease.”