British Car Insurance May Owe More For Long-Term Injuries
Car insurance is purchased to protect you and other drivers on the road in case of an accident. If someone is hurt, or a car is damaged, agencies make a one-time lump payout to help fix the issue and cover costs. However, human injuries are complex things and could lead to long-term issues that are expensive for those affected (or their medical insurance companies). The British government, in the midst of worrying about Brexit, and its Ministry of Justice have ruled that insurers will be on the hook for more of these long-term costs. While this is good for people injured in car accidents, this will also result in higher insurance premiums and a greater burden on the insurers.
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According to BBC News, the lump sum given to accident victims with serious injuries is supposed to last the affected person the rest of their lives. When figuring out how much money that should be, an assumption is made that the injured person will invest it for more money in the future. To compensate for the interest and earnings received, insurance companies have taken advantage of a 2.5% “discount rate” that shrinks payments to make up for that growth in cash the victims will have. The Ministry of Justice has just lowered that rate to a negative .75%, meaning that much more money is owed to the injured.
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Britain’s Association of British Insurers is fighting back, claiming that the decision is crazy and could cost drivers up to a £1,000 a year increase in insurance premiums. We’ll keep an eye on the situation and see if laws are changed to protect the insurance agencies, or if accident victims receive a higher payout to deal with the consequences of the event.
News Source: BBC News