Whilst insurers are experiencing increasing levels of claims frequency and cost (especially for bodily injury and vehicle repair costs), there have been two major changes that are having an impact:
The first is Insurance Premium Tax. This is a Tax levied by the Government on most insurance products. Since November 2015, this has increased from 6% to what will be 12% from June 2017. The insurance industry has lobbied against what will have been a 100% increase in this tax in less than two years.
The second change, announced by the Ministry of Justice in February 2017, has been to the way compensation payments for life changing injuries or death are calculated.
In essence, the formula used for calculating investment returns on lump sum payments assumed a return of 2.5%. This has been reduced to -0.75%, which means the resultant lump sum payments to fund lifetime care will increase dramatically.
Industry experts have estimated the cost of the change to the way compensation is calculated will be between £50 and £70 per policy.
The Government imposed tax and the Ministry of Justice imposed compensation change affect all motor insurers and are unavoidable, although the insurance industry continues to lobby Government on both.
We do appreciate the pressures this creates on motorists in particular, but we felt that given the impact of these two particular changes, that it was important that we highlight these developments to you.
In an effort to minimise the impact of these increasing costs, each year we review your policy to try and ensure that you are getting the right balance of price, cover and service from our panel of insurers.
If you want any further information, or to discuss these changes in more detail, please speak to your branch and someone will be more than happy to help.
You can download our informative leaflet here.