Your insurance premium could be SLASHED after U-turn on personal injury payout Ogden rate rules

INSURANCE premiums are set to fall following the government U-turned on its injury compensation rates.

Costs were expected to rocket by hundreds as a result of changes produced in March 2021 – however the Secretary of state for Justice has confirmed the guidelines is going to be revised again.

Insurers' profits dived as they were instructed to make record payouts – and already motorists' policies had risen by lb75.

And it had been prone to continue with lb100 hikes predicted next year – soaring up to lb500 for younger drivers.

But new proposals look set to ease the pain – and drivers may even find themselves with cheaper policies as a result.

The Ogden rate, which helps calculate compensation paid out to those injured in car crashes, was cut from 2.5 per cent to -0.75 percent.

But it's now likely this'll be revised to one per cent in the new "fairer" system.

The move was welcomed by insurers with Direct Line shares jumping by four percent – after the firm took a lb217million hit when the rate changed in March.

Insurers are actually now being called on to pass on these savings direct to consumers.

Martin Dyson, head of RAC Insurance, said: "This really is good news for motorists because the price of auto insurance has risen by around 10% within the last year using the Government's switch to the discount rate as being a significant factor.

"This led to insurers having to make larger compensation payments which the industry then had to fund within the only way it could by increasing premiums.

"The way the rate is to become set going forwards should be fair to those receiving compensation payments while also helping to ensure car insurance premiums are as affordable as you possibly can."

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Huw Evans, director general of the Association of British Insurers, added: "This is a welcome reform proposal to deliver a personal injury discount rate that's fairer for claimants, customers and taxpayers alike.

"If implemented it will help relieve some of the cost pressures on motor and liability insurance in a manner that can only benefit customers."

The proposals still need be approved by government but could be changed as soon as next year – using the rate then reviewed every three years by a completely independent panel.

David Lidington, lord chancellor and justice secretary, said: "We want to introduce a brand new framework based on how claimants actually invest, in addition to ensuring the speed is reviewed fairly and frequently."