Insurance company Direct Line charged motorists 6.6 per cent more on average for their car insurance during the first three months of 2017, compared to the same period last year.
The increase is being partly blamed on the government changing how payouts for severe personal injuries are calculated, deciding to cut the so-called Ogden discount rate in March.
Rather than this discount rate cut directly resulting in a rise in premiums, however, it is suggested that Direct Line instead raised its prices in anticipation of a rise in claims.
Additionally, Insurance Premium Tax (IPT) is set to rise from 10 per cent to 12 per cent in June, likely bringing added costs in the process. This will be the third IPT increase in two years, having increased in July 2015 and March 2016.
“This consultation document is an important step forward in helping get a fair, modern way to set the discount rate which works for claimants, consumers, businesses and taxpayers,” said Huw Evans, director general of the ABI.
“Only a month after the setting of an absurdly low rate, the government has moved swiftly to consider reform and we need to see this urgency maintained with a firm commitment to legislate in the Prisons and Courts Bill currently before parliament.
“As the only major economy in the world with a negative rate, the UK will face significantly increased insurance and taxpayer costs until the system is reformed and a new fairer rate can be set,” he continued.