Young drivers are facing soaring increases in the cost of car insurance, with an average annual rise of £594 threatening to put some drivers off the road.
The typical motorist under 24 paid £1,792 a year for car cover in August 2023, up 50 per cent from £1,198 in the same month last year, according to comparison website Compare the Market.
By contrast, the average premium is £743 a year for drivers across all age groups, an increase of £208, or 39 per cent, in one year.
Price of freedom? Many young Britons are desperate to learn to drive, but then are hit by rising car insurance premiums.
More than half of drivers are worried the cost of driving will put them off the road, Compare the Market said.
Car insurance premiums now account for 63 percent of the total cost of operating a car for ages 17 to 24.
Julie Daniels, car insurance expert, said: ‘Many young drivers will be worried about the rising cost of car insurance in recent months.
“When combined with the broader cost of living crisis, more expensive insurance premiums could mean driving becomes prohibitively expensive for many young people.”
However, Compare the Market figures are for the premiums drivers are quoted, not what they actually pay, which tends to be lower.
Alternative statistics from trade body the Association of British Insurers (ABI) show the average car insurance premium was £511 in the second quarter of this year, up from £471 in the previous quarter.
Why are auto insurance premiums increasing?
Insurers say their own costs are rising, leaving them no choice but to pass them on to drivers in the form of higher premiums.
These rising costs include higher energy bills for insurers and their auto repair networks, higher staff salaries, and increases in the cost of spare parts and paint.
In addition, many drivers face increases in premiums due to regulation that means renewing customers cannot be charged more than existing ones.
On 1 January 2022, regulator the Financial Conduct Authority (FCA) introduced rules requiring insurers to price products to their customers in the same way.
The goal was to stop overcharging existing customers just to allow insurers to offer cheap premiums to attract new customers, a practice called the “loyalty penalty.”
Cutting it down: Adding a more experienced driver to your policy can mean lower premiums
But regulations, coupled with the cost of living crisis, mean driver premiums are rising across the board.
An increasing number of auto insurers also charge their customers additional administrative fees, such as creating or renewing a policy.
These fees increase the overall cost of insuring a car and are often poorly understood by drivers, even though they are listed in the fine print of insurance contracts.
How can young drivers reduce their premiums?
There are several ways younger drivers can reduce their insurance bills.
1. Compare prices to find the best policy
This is the number one way to save on car insurance. Drivers can save hundreds of pounds by shopping around when taking out our cover or renewing it.
Daniels, from Compare the Market, said: For those looking to save money on their car insurance, it’s a good idea to shop around and compare policies to see if there’s a cheaper deal available. Switching to a telematics policy may also be a more affordable option for some young drivers.’
Insurers can no longer charge new customers more than new ones. That means that if a driver renews, he should be quoted the same (or less) than if he had started a new policy with the same insurer.
But it is still possible to get a better deal by comparing prices.
2. Consider “black box” telematics insurance
Black box policies are those where the insurer uses a system in your car to monitor your driving, either a separate device or through the driver’s smartphone.
These policies are designed to reward safe drivers.
They can substantially reduce premiums once you begin to prove that you are a good driver. Some insurers even offer an initial discount if you take out a telematics policy.
3. Pay annually, not monthly
When taking out a new policy, drivers will have the option of paying for the entire year in advance or in monthly installments.
Many opt for monthly payments because it means not having to part with a large sum of money at once, but paying for insurance in installments usually means paying at least 10 percent more.
If you can afford to pay your annual premium up front, you could save money.
This is because your insurer may charge you interest on the monthly payments. It’s worth asking them if there is a difference and, if so, what it is.
4. Pay only for what you need
Some car insurance deals include additional benefits such as a courtesy vehicle, windscreen cover, breakdown cover and motor legal protection.
These could all definitely be helpful, but they will almost always increase the overall cost of your car insurance.
Many consumers who buy supplemental insurance forget they have it, and some offers are only claimed once every 664 years.
5. Consider an advanced driving course
If you recently passed your test, taking a complementary course, such as the more well-known Pass Plus, can help you reduce your premiums.
However, not all insurers care about courses like Pass Plus, so check with your insurance company first.
However, advanced driving courses also help build confidence and safer driving, which is helpful regardless of the high prices.
6. Include a designated driver on your policy
Younger drivers may find that they get cheaper premiums by including an older, more experienced driver on their policy.
However, what you absolutely cannot do is pretend that this more experienced driver is the main driver, unless he is.
Doing so is a type of fraud known as ‘fronting’, which insurers take seriously.
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