Changes to the Ogden discount rate will cost insurers and reinsurers approximately £3.5bn, while premiums are predicted to rise by a further 9% this year.
That is according to estimates by EY, who say that around £2.4bn of losses have already been disclosed publically since it was announced that the rate used to calculate compensation claims would be cut from 2.5% to -0.75%.
The decision took insurers by surprise, and worsens an already difficult environment for an industry facing higher repair bills and a rise in whiplash-related claims.
"The impact of the rate change to the motor insurance industry has been considerable at around £3.5bn. While a reduction was certainly on the cards, virtually no one anticipated the extent of the drop," EY executive director, Tony Sault, said.
"The general election result last week may have created additional uncertainty and insurers will be hoping that the Ogden consultation and reform of whiplash claims will remain priorities for the new Lord Chancellor and the government."
The Association of British Insurers (ABI) revealed earlier this year that motor insurance premiums were at their highest level recorded, after rising five times the rate of inflation in 2016.
ABI's analysis showed that the average price paid for comprehensive insurance was £462, and that premiums over the whole of last year were 9.3% higher than they were throughout 2015.
However, EY predicts that rising reinsurance and claims costs due to the new discount rate, high repair cost inflation and the rise in insurance premium tax to 12% could cause consumer rates to increase by a further 9.0% in 2017 to £503.
"The impact of the Ogden rate change, together with the increasing cost of repairing ever more complex cars, will inevitably filter through to premium rates," Sault continued.
"Higher compensation now due for serious injuries means insurers will have to pay out around 9% more in future claims, and further effects will be felt next year when annual reinsurance cover for large claims come up for renewal.
"Young drivers will undoubtedly have to bear the brunt of the increase due to the disproportionate number of larger claims they cause.
"A fundamental review of Ogden is increasingly urgent for consumers and must not be abandoned in the aftermath of the general election."
