Following backlash from both the insurance industry & the public, the Chancellor Philip Hammond announced that he would reconsider the changes in the rate. The Government has now proposed to change the way the rate is calculated from being based on “very low risk” to “low risk” investments, placing the actual rate somewhere “in the region of 0 to 1 per cent.”
Previous estimates by financial analysts suggested that the average insurance price went up by £75 as a result.
In February, the Ministry of Justice announced it would cut the “Odgen rate” that’s used to calculate compensation payouts from 2.5 per cent to -0.75 per cent, which translates to mean that previously, compensation payments by insurers, the sum is discounted to take into account the extra interest they could earn from investing it. The current rate meant that insurers would charge a heftier premium to offset these interest charges.
The new charges should shave £21 on their current premiums. This could be as much as 10% on a lot of seasoned drivers with high NCD.