July 18 (Reuters) - The average price of UK motor insurance hit a record high in the second quarter of the year, driven by new rules for personal injury claims and a rise in the insurance premium tax, the Association of British Insurers (ABI) said.
Premiums rose to 484 pounds ($632) in the quarter, up 4.8 percent on the previous quarter and 11 percent on the same period last year, the fastest year on year rise ever recorded.
“The rapid increase follows the recent government decision to drastically cut the personal injury Discount Rate. Insurance Premium Tax also went up from 10 percent to 12 percent on the 1st June,” the ABI said, citing its motor premium tracker.
A government review earlier this year led to a cut in the discount rate, or Odgen rate, used to calculate personal injury claims payments to minus 0.75 percent from the 2.5 percent in place since 2001, a move that wiped millions off the profits of British insurers.
Average premiums rose to 498 pounds in June, from 480 pounds in May, the ABI said.
It said the change in the Odgen rate would also lead to reinsurance premiums rising on renewal, adding to insurer’s costs and in turn to the premiums they charge customers.
Admiral, Direct Line, esure and Hastings operate in Britain’s highly competitive motor insurance market.
$1 = 0.7653 pounds Reporting by Noor Zainab Hussain in Bengaluru; Editing by Mark Potter