Recent data reveals that young drivers are grappling with unprecedented car insurance costs, some confronting premiums nearing £3,000. According to leading price comparison firm, on average, 17-20-year-olds have witnessed a staggering increase of over £1,000 in their insurance premiums compared to the same period last year.
Overall, drivers, on average, are now contending with a 58% surge in car insurance expenses compared to January of the previous year. Steve Dukes, the Chief Executive, highlighted on BBC Radio 4’s Today programme that the surge in claims frequency over the past couple of years, exacerbated by the pandemic, has played a pivotal role. Dukes further explained, “The cost of second-hand cars is higher than they used to be, the cost of parts, the cost of labor to make repairs – and that’s all being passed onto consumers.”
The volatility in prices for second-hand cars, typically the first choice for newly-qualified young drivers, can be traced back to the early months of the Covid pandemic. A surge in demand for used cars ensued as the production of new vehicles dwindled due to a global shortage of computer chips and other essential manufacturing materials.
While the used car market experienced a peak of 31% price increases in March 2022, according to the Office for National Statistics, prices have since receded significantly.
Across all drivers, average price rises for car insurance ascended by £366 to £995. However, the brunt of this increase was borne by younger drivers. Premiums for 17-year-olds skyrocketed by an average of £1,423, reaching £2,877, while 18-year-old drivers faced an average policy price of £3,162.
It’s essential to note that these figures are derived from the average of the best five quotes received, rather than the actual prices paid for policies.
In response to the soaring costs, Steve Dukes suggested practical measures to alleviate premiums. He recommended young drivers share driving responsibilities with an older, more experienced driver, adding them as a named driver, which can significantly reduce costs by hundreds of pounds.
Dukes also proposed exploring telematics or “pay how you drive” insurance, wherein the driver’s behavior on the road is shared with the insurance provider or occasional drivers’ insurance.
However, with the substantial price increases for 17-20-year-olds, many young drivers may find themselves questioning the affordability of driving altogether. Dukes cautioned the industry against inadvertently pushing younger drivers towards alternative modes of transportation as prices reach unprecedented highs.
Addressing the concerns, the Association of British Insurers (ABI) acknowledged the potential expense of car insurance but emphasized that there are ways to mitigate costs. It stressed the importance of never driving without cover and urged individuals struggling with costs to communicate with their insurers.
The ABI, underscoring the risk-based nature of insurance, cited its data indicating that the average cost and frequency of claims are higher for younger drivers, influencing premiums. According to the ABI’s analysis of 28 million policies, drivers’ insurance costs rose between July and September by an average £561, marking a 29% increase compared with the same period in 2022. The figures provided are based on the actual prices customers paid for their cover rather than quoted prices.
