Drivers will have to pay much more for motor insurance after the Government announced new rules that will push up lump sum payments for personal injury claims.
The Ministry of Justice said the discount rate used to calculate lump sum pay-outs would be cut to minus 0.75%, from 2.5%, Reuters reports.
The ministry expects the lower rate to force insurers to pay out more in cash to personal injury claimants to ensure that returns over their lifetime meet the awarded compensation.
The change will come into effect next month.
"The current legal framework makes clear that claimants must be treated as risk-averse investors, reflecting the fact that they may be financially dependent on this lump sum, often for long periods or the duration of their life," the Ministry of Justice said in a statement.
The Association of British Insurers, calling the move a "crazy decision", said in a statement motor and liability premiums would rise as a result.
Consultants PwC estimated annual motor premiums would rise by £50-75 on average.
Premiums rose 9.3% last year due to tax increases, rising repair costs and whiplash claims.
However, the Association of Personal Injury Lawyers said in a statement that "people already coping with the most severe injuries have been deprived of the help and care they need for years".