The government has decided to reverse its decision to change the Ogden rate to -0.75%. This change meant that insurance companies had to pay out more to accident victims, but the knock on effect was a rise in prices overall to cover these costs. The new rate will raise the rate somewhere between 0 and 1 percent, still falling short of the pre reform rate of 2.5 percent.
Accountancy firm EY have predicted that the change will lead to a fall of between 2-4% on rates, saving up to £21 annually. Prior to this change, motor premium rates were at record highs, leaping around 10% in the last 12 months. This was due to a number of factors, including the rise in IPT (Insurance Premium Tax) and the Ogden rate.
Reforms to whiplash claims are expected to drive down premiums still further – by as much as 8-10%. Potentially this could mean a saving of £45 once the reforms are implemented sometime in 2018.
What is open to debate is the speed in which these reforms will be brought about. There is a risk that Brexit legislation will be too lengthy for Parliament to pass the Civil Liability bill needed. However, it is still good news for both the industry and consumers and prospects for 2018 are looking a lot brighter.