RAC reacts to personal injury compensation Discount Rate change

The Government has cut the 'Ogden' Discount Rate from 2.5% to -0.75% meaning compensation pay-outs in life-changing personal injury cases are expected to rise sharply.

RAC Insurance director Mark Godfrey said: “It is a bizarre decision from the Government to make the first adjustment to the Discount Rate in 16 years at the very same time as they have effectively admitted the current system is flawed by announcing a consultation on finding a better and fairer framework for handling life-changing personal injury pay-outs.

“This move will increase the total amount of compensation awarded in every such case and this will instantly increase the cost of motor insurance premiums as insurers pass on the costs. This will be exacerbated still further in June when another 2% is added to insurance premium tax. The combined effect of this means that motorists are likely to see their premiums increase by 10% and some parts of the market, notably younger and older drivers, may see substantially higher increases.

"Even before this, research for the latest RAC Report on Motoring found that motorists are already feeling the effect of higher premiums with the cost of insurance being ranked as the fifth biggest motoring concern, and now sadly these changes will only make things worse.”