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| Motor insurance premiums hit record high, as cars go hi tech | Motor insurance premiums hit record high, as cars go hi tech |
| (35 minutes later) | |
| Car insurance premiums in the UK have hit a record high, partly because cars' increasingly complex electronics have made repairs more expensive. | Car insurance premiums in the UK have hit a record high, partly because cars' increasingly complex electronics have made repairs more expensive. |
| The average annual comprehensive policy cost £462 in the last three months of 2016, according to the Association of British Insurers (ABI). | The average annual comprehensive policy cost £462 in the last three months of 2016, according to the Association of British Insurers (ABI). |
| Previously the highest figure was £443 in the spring of 2012. | |
| The rise comes in spite of government attempts to limit compensation payments and cut court costs. | The rise comes in spite of government attempts to limit compensation payments and cut court costs. |
| One reason for the increase is a rise in the cost of repairing cars that have been in accidents, because of their increasingly sophisticated electronics. | One reason for the increase is a rise in the cost of repairing cars that have been in accidents, because of their increasingly sophisticated electronics. |
| Buying in spare parts is also getting more expensive, due to the weakness of sterling. | Buying in spare parts is also getting more expensive, due to the weakness of sterling. |
| The average repair bill has risen by 32% over the last three years to £1,678, the ABI said. | The average repair bill has risen by 32% over the last three years to £1,678, the ABI said. |
| 'Crisis' | 'Crisis' |
| The ABI warned that premiums were likely to increase further, if the government went ahead with plans to review the so-called discount rate. | The ABI warned that premiums were likely to increase further, if the government went ahead with plans to review the so-called discount rate. |
| When accident victims are given a lump sum in compensation, the sum is discounted to make up for the extra investment return they are likely to receive. | When accident victims are given a lump sum in compensation, the sum is discounted to make up for the extra investment return they are likely to receive. |
| Since 2001 the discount rate has been 2.5% - based on investment returns from government bonds. | Since 2001 the discount rate has been 2.5% - based on investment returns from government bonds. |
| If that rate is reduced, insurance companies will have to pay out more - thus increasing premiums. | If that rate is reduced, insurance companies will have to pay out more - thus increasing premiums. |
| "The sudden decision to review the discount rate has the potential to turn a drama into a crisis, with a significant cut throwing fuel on the fire in terms of premiums," said Rob Cummings, the ABI's head of motor and liability. | "The sudden decision to review the discount rate has the potential to turn a drama into a crisis, with a significant cut throwing fuel on the fire in terms of premiums," said Rob Cummings, the ABI's head of motor and liability. |
| The government said it would make an announcement as soon as possible. | The government said it would make an announcement as soon as possible. |
| "The Lord Chancellor has decided to review the discount rate to ensure personal injury claimants are fairly compensated," said a spokesperson for the Ministry of Justice. | "The Lord Chancellor has decided to review the discount rate to ensure personal injury claimants are fairly compensated," said a spokesperson for the Ministry of Justice. |
| "Due to ongoing consultation it is not yet possible to announce the review's outcome." | "Due to ongoing consultation it is not yet possible to announce the review's outcome." |
| Whiplash | Whiplash |
| The cost of insurance has also risen because of a series of increases to Insurance Premium Tax (IPT). | The cost of insurance has also risen because of a series of increases to Insurance Premium Tax (IPT). |
| IPT went up from 6% to 9.5% in 2015, to 10% in 2016, and will rise to 12% in June 2017. | IPT went up from 6% to 9.5% in 2015, to 10% in 2016, and will rise to 12% in June 2017. |
| Personal injury claims, such as whiplash, have also become more expensive, rising by 2.3% over the last year, the ABI said. | Personal injury claims, such as whiplash, have also become more expensive, rising by 2.3% over the last year, the ABI said. |
| However, the government is currently consulting on plans to cap compensation payments to accident victims, which it says could reduce annual premiums by £40 a year. | However, the government is currently consulting on plans to cap compensation payments to accident victims, which it says could reduce annual premiums by £40 a year. |
| It also wants more disputes settled in the small claims courts, which would reduce costs for insurance companies. | It also wants more disputes settled in the small claims courts, which would reduce costs for insurance companies. |