Young Driver Insurance Cap

Johnmcl7

victorias_dad wrote: »

To be honest Ii would like to see some hard facts about teenage insurance claims, it is all very well saying they are a bad risk but what proof do we have to back these claims up.

Yes, there's a post above showing the data from Admiral and this is one based on actual casualty data as well:

http://www.brake.org.uk/facts/young-drivers-the-hard-facts.htm

I don't see it companies being unfair, they insure based on the perceived risk and they have a lot of data available themselves from claims that have been made. As young drivers are statistically very high risk then it's understandable the insurers charge more, if the whole thing was a scam and they were overcharging for large profit then any company could easily destroy the market by offering cheaper premiums but it isn't that way at all.

As someone else has pointed out, all an insurance cap would do is prevent young people from driving at all as insurance companies would simply decline to offer a policy.

John

dacouch

victorias_dad wrote: »

Dacouch with respect did you read the post or more importantly did you understand it?. The insurance is cheaper at his grandmothers address, I am well aware that insurance is a business, I am also aware it would be unwise to register the car at his grandmothers home but I still question the validity of a premium of £9.500 to insure a peugeot 206 or £39000 to insure an old 205 run about.
It would only take one company to play fair and then we might get a bit of competition

With respect did you read my post.

The theft risk has a negligible effect on young drivers premiums especially on older cars.

The reason it will be cheaper at the grand parents house is the claims costs to the insurer in that postal area will be lower. The costs that concern the Insurer are predominantly the claim costs from the other party when it comes to young drivers. Your post code must produce less accidents / injury claims etc and the value of these claims being lower hence the lower premium.

Insurers cannot underwrite an unlimited amount of customers, the Insurer has a pot of money let's say £100m that it has to set aside in a ring fenced fund to pay claims. This will allow it to accept lets say £50m in total premiums.

The Insurer can either accept lots of small premiums from lower risk drivers or a lower amount of bigger premiums from higher risk drivers eg young drivers or drivers with lots of convictions etc. Or it can take a combination of the two.

Insurers tend to go for the lots of lower risk drivers with lower premiums as the claims are easier to predict.

Apart from young drivers having more fault accidents and the claims being higher than older drivers as I explained in an earlier post they tend to have lots of young passengers. The big headline accidents that make the papers for pay outs of £5m to £10m for round the clock nursing a far more common with young drivers. A claim or two of this side can really knock out an Insurers profits even with reinsurance*. Being conservative by nature Insurers tend to go with the lower risk.

If there was money to be made with young drivers an Insurer would step into the market and undercut the market. Quinn tried it but almost went bankrupt thanks to their underwriting decisions and the investment decisions the owner made.

* Insurers take out reinsurance with ReInsurers to cover themselves against large claims or catastrophes. When they obtain cover with the Reinsurers they obtain a quote for the cover which is based on the type of customers they will accept. The reinsurer provides a quote and provides criteria for which types of customers the Insurer can accept. If the Insurer wants to take on young drivers they will have to pay a massively higher premium for their reinsurance than they would if they accepted safer drivers. The extra cost of the reinsurance is passed on to their customers, if they want to also accept safe drivers, the premiums for the safer drivers has to subsidise the extra young drivers premiums which in turn makes them uncompetitive for the safer drivers the Insurers really want as they're the ones they make money from.

Insurance is a complicated product, it's not a case of complaining about the cost of young drivers premiums and they will suddenly reduce. The only way they will reduce is of young drivers have less claims / less expensive claims. This will not happen unless young drivers receive more training, they change their driving styles, change the amount of passengers they carry etc etc which would need changes in the law

victorias_dad

The admiral link specifically states 17-18yr olds, both myself and xmodz have both stated we are talking about 19yr olds. The brake link we can take with a pinch of salt as they would prefer not to have any drivers irrespective of age. It is stated on this site that the average premium for a teenager to be an eyewatering £2900 so I dont think a premium of £9,500 is affordable so he will have to wait till he turns 21.

Johnmcl7

The Brake link is based on actual data so no, you can't just dismiss it like that particularly when you haven't provided any data at all to back up your assertions that the only reason insurance is high for young people is because it's a massive price fixing scam by the insurance companies. Young drivers are a much higher risk and therefore insurance is much more expensive and as dacouch says, without changes in the law to try and reduce that high accident rate it's unlikely there will be any change in insurance.

John

pc1271

I think we'd all accept that young drivers are generally higher risk than older drivers, but what is the average insurance claim for this age group? and how does this compare to the £2-3k premiums being quoted?

dacouch

There was someone who decided Insurers were ripping his building firm off so he set up his own Insurance company.

Sean Quinn was recently released from jail following massive financial irregularities with his Insurance Company (Quinn) who had to be bailed out by the Irish government.

dacouch

pc1271 wrote: »

I think we'd all accept that young drivers are generally higher risk than older drivers, but what is the average insurance claim for this age group? and how does this compare to the £2-3k premiums being quoted?

According to Admiral's data (Which is only from their own customers and possibly from the data they receive from quotes they provided).

The average 17 or 18 year olds claim is £3500 as opposed to £1741 drivers overall (Of which the average includes 17 and 18 year olds).

They also state 13% of 17 or 18 y.o have had an accident, as opposed to 6.5% of motorists overall which again the average includes 17 or 18 y.o. The data for over 40's is 4.5% and 50's is 2%

http://www.admiral.com/press-releases/106/shocking-record-of-young-drivers-revealed/

I've seen other Insurers data for 17 and 18 y.o where their average claim was nearer £7k

Aretnap

victorias_dad wrote: »

It would only take one company to play fair and then we might get a bit of competition

People seem to like to thing that there's no competition in the car insurance industry but the truth is that the industry as a whole hasn't made an underwriting profit since 1994. If the insurance companies are a big cartel fixing prices to rip drivers off, they're not doing a very good job of it.

As noted, if £2900 really is an enormous over-estimate of the risks young drivers pose, there's a killing to be made for any insurer who offers to insure them for £2500 - they could collect the business of every young driver in the country, and still make a big profit from each of them, leading to massive profits overall. So why does nobody do it?

flea72

oohes wrote: »

That is ridiculous!! I'm female and last year when I was 19, my insurance was around £500 on a Ford Ka. Even with the new EU gender rules it's still around £500. Have you tried a confused.com quote? Is that the cheapest you're being offered?

Have just insured DD today on an 11yr old KA. Its cost us £1200 and thats on a provisional licence as she hasnt passed test yet.

We did consider waiting til she passed her test, but quotes were coming in at £2.5k (companies with bad reviews) or £3.5k (well known companies)

Having spoken to insurance company, once she passes test, the premium wont rocket, she just needs to pay an amendment fee of £50 to show change of licence

Am in no rush for her to pass as the longer she is chaperoned, the more NCB she can build up, before going it alone and renewal, which hopefully will bring prices down a bit, or similar to currently paying, rather than the £2-3k ones

dacouch

Aretnap wrote: »

People seem to like to thing that there's no competition in the car insurance industry but the truth is that the industry as a whole hasn't made an underwriting profit since 1994. If the insurance companies are a big cartel fixing prices to rip drivers off, they're not doing a very good job of it.

As noted, if £2900 really is an enormous over-estimate of the risks young drivers pose, there's a killing to be made for any insurer who offers to insure them for £2500 - they could collect the business of every young driver in the country, and still make a big profit from each of them, leading to massive profits overall. So why does nobody do it?

To be fair the combined ratio does not include profits made on investments, although in the current climate the investment profits are not great