Following the first adjustment to a government policy in five years, drivers in England and Wales should see a drop in their auto insurance rates.

The savings come after new Personal Injury Discount Rates (PIDR) were revealed and a Government Actuary's report was made public today.

Insurers base their premium-setting decisions on the PIDR, which is used to calculate lump sum damages awarded to victims of severe and protracted personal injury.

According to the actuary site, the rates are designed to give clients complete and equitable financial recompense for all anticipated losses and expenses brought on by their injuries.

According to accounting firm PwC, drivers in England and Wales should save £50 on their auto insurance premiums, which are expected to drop by about 5% as a result.

The actuary's rate will go from -0.25% to 0.5%, which is in line with a similar change implemented in September in Scotland and Northern Ireland.

The statutory interest rate, which is reviewed and set by the Government once every five years, is calculated based on the “investment returns a claimant could generate from investing a compensation payment over a lifetime".

PwC said: “The interest rate environment has changed dramatically since 2019, meaning claimants should see the same returns now from investing a smaller lump sum as they would have done five years ago with a larger sum.”

Mohammad Khan, head of general insurance at PwC UK, explained that the increase in the Personal Injury Discount Rate should bring some consistency to “aspects of how motor insurance premiums and payouts are calculated across the UK”.

He stated that this change is "good news for drivers" as it will "further intensify" the competitiveness of the motor insurance market.

The changes come at a crucial time when premiums for drivers have risen by over 20 per cent in the last two years, but Khan noted that this direction of travel has been "turning and these amounts are starting to reduce".

He added: “As for the insurance companies, they had expected a change of this scale and will already be pricing it into their pricing."

Last month, the Association of British Insurers (ABI) detailed how car insurance premiums fell by two per cent from July to September to £612.

The report found that during the three-month period, insurers paid out £2.9billion for car insurance claims, which was 14 per cent more than last year when £2.5billion was paid out.

A spokesperson for the ABI told GB News: “The setting of the new Personal Injury Discount Rate is welcome and something that we have called on as part of our 10-Point Roadmap on Motor Affordability.

“The move to a positive rate reflects the improved investment market conditions since the rate was last set five years ago. We and our members firmly believe in full and fair compensation for claimants.”

However, the spokesperson noted that the Lord Chancellor's approach embeds “significant caution into the calculation which could lead to over-compensation".

The ABI warned that this could have an “adverse impact” on all premium-paying customers, particularly young drivers who still typically pay higher car insurance prices.