The government’s “crazy” change to the way insurance premiums are calculated may have a disproportionate effect on young drivers, making car insurance too expensive for those under 25.

Last week saw the government change the ‘discount’ rate on insurance premiums, lowering it from 2.5 percent to -0.75 percent. This figure is factored into compensation payments to account for the amount victims could earn if it were to be invested.

This decision is likely to dramatically increase the cost of insurance premiums across the board, but particularly for young drivers. Accountancy firm PwC warned that the average cost of a comprehensive policy is likely to rise by between £50 and £75 a year; but those under 25, for whom insurance is already significantly more expensive, may see premiums rise by up to £1000.

The Association of British Insurers (ABI) described last week’s change to the discount rate as a “crazy decision”. Matt Cullen from the ABI warned on Monday that the price increases are likely to have serious consequences:

“Lots of young drivers rely on their cars – whether to get to school or university or college or work – and it is very important that we have an environment which does not encourage practices that are unhelpful or in some cases illegal, such as fronting, where the parent buys the insurance and has the young person as the second driver when it is actually just the young driver driving. Or driving uninsured, in the worst cases”, Cullen said.