Equalities Bill Could See Car Insurance Premiums Rise
02 July 2008 / by Rachel Mason
The new Equalities Bill, being introduced to tackle prejudice, could see young drivers’ car insurance premiums go down but everyone else’s go up.
According to uSwitch.com, the Bill could force insurance companies to bring down premiums for young drivers, and this, it argues, could have “far reaching consequences for the car insurance industry.”
Despite the fact that motorists aged between 17 and 21 make up just seven per cent of the car insurance market, they account for more than a fifth of total premiums, paying nearly £1,000 each to insure their vehicles.
According to uSwitch.com, young drivers are paying 115% as much than other motorists; while the average ‘shoparound’ car insurance premium in the UK is £459, young drivers are paying more than double – an average of £989.
However, uSwitch.com says there is good reason why young drivers pay more to insure their cars.
“They account for 16 per cent of motoring offences and, under 21 year olds, are responsible for 34 per cent of dangerous driving offences. This, combined with the fact that young male drivers are ten times more likely to be involved in a motoring accident, goes some way to explain why young drivers are charged such high premiums,” said the site.
Ashton Berkhauer, insurance expert at uSwitch.com, says the Bill could have some very significant affects on the car insurance industry, the most consequential being the potential hike in premiums for low risk drivers.
“In theory, the Equalities Bill could mean the end of the road for higher premiums for young drivers. However, insurers have to price by risk and there is clear evidence that younger drivers are more of a hazard on the roads,” he said.
“If the Bill calls for pricing to be equal across age groups this could lead to a rise in premiums for lower risk, safer drivers, who would effectively be subsidising their higher risk counterparts.”
Mr Berhauer is also concerned that if premiums go down for young drivers, they may be able to afford to insure faster cars and as a result accidents could increase; “this would be wrong and we urge the Government to seriously consider all the implications before implementing any change,” he said.
“Whether the Equalities Bill impacts young driver premiums or not, the most important thing is to research the cost of insurance before you buy a car. Young drivers must do their homework first and shop around to make sure they find the best cover and policy features to suit their needs and budget.”
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