The Ministry of Justice has recently announced that it is changing the way that compensation payments will be calculated from 20 March 2017.
Courts use a specific calculation to determine the lump sum compensation that insurance companies should pay out under motor and liability policies to claimants who have suffered life-changing injuries. This calculation is changing and will mean that people with long life expectancies will see lump sum awards increase by 50%. For example, the award made to a 27-year-old female with a serious life-changing injury could move from £6.5m under the old rules to nearly £14m under the new ones.
What does this mean?
Whilst it is only fair that injured people be fairly compensated, the change will significantly increase the cost of claims on motor and liability insurance policies.
With the average motor insurance premium being £462 (according to the Association of British Insurers), you can see that it will take quite a few of these to cover the additional £7,500,000 in the above example! It is suggested that car insurance premium will increase on average by £75, but higher risk drivers will face even bigger increases.
The NHS could see it’s compensation costs by £1bn according to some commentators.
All this comes ahead of a further rise in Insurance Premium Tax from 10% to 12% in June.