TECHNOLOGY can help young drivers priced out of car insurance, writes Jeff Salway.
So-called “black boxes” that allow drivers to slash their car insurance costs are still not being widely used by those that can benefit most.
Some drivers can cut their premiums by hundreds of pounds a year by taking out insurance policies based on telematics and which reward careful driving, experts say. But while a growing number of insurers are promoting such policies, take-up among the younger drivers paying the highest premiums remains low.
The Association of British Insurers (ABI) this week warned that progress on making car insurance more affordable for young drivers has stalled. It called on the UK government to “kick start” reforms to drive down premiums for young drivers, which, despite some improvements, have remained high.
Black box technology is perhaps the most effective way for young drivers to lower their insurance costs. It works by tracking the way that a car is being driven, recording details such as cornering speeds and braking to build up a picture of how careful the policyholder is behind the wheel.
The information helps give insurers an idea of how risky a driver might be and therefore the appropriate premium level to charge. So the safest drivers can cut their premiums significantly, while those with a tendency towards recklessness can end up paying more.
Insurers use the data in different ways, with some using it to offer annual discounts and others to vary monthly payments, for example.
The biggest benefits are felt by young drivers who have seen premiums rocket in recent years, making it all but unaffordable for many. With young drivers as a demographic considered to be the riskiest insurance bet, telematics allow safer drivers to prove that they can justify lower charges.
“Young drivers pay much higher premiums than other drivers because a) they have no no-claim bonus and need time to build that up, assuming they make no claims; and b) they are inexperienced and more likely to be involved in a crash and also more likely to take risks, men especially,” said Ian Crowder, spokesman for AA Insurance.
Young drivers can typically enjoy significant discounts if they drive well during the first year of a policy, with the savings gradually decreasing from that point.
“So for instance, a young driver who, after their first year has achieved a 100 per cent perfect driving record and has achieved the maximum discount available, then the scope for getting further reductions in their second year are reduced – but maintaining a high standard of driving will ensure that premiums stay low.”
After three or four years the accumulation of no-claim bonuses can make conventional insurance policies more affordable, making it potentially cheaper to switch.
One of the newest telematics policies on the market was launched recently by More Than. It allows customers to build up a positive “driving style” score that can earn them quarterly cash rewards and lower renewal costs. The insurer claimed the system could cut premiums for young drivers by up to £440 a year.
But while most insurers now offer some form of black box policy, they still account for just one in ten car insurance policies sold. That modest take-up level is attributed to low awareness, fears over the implications of poor driving and concerns over the “big brother” aspect of having a device that tracks where and when someone is driving.
The nature of telematics means it simply isn’t suitable for some people. Middle aged drivers with full no claim bonuses are highly likely to pay cheaper premiums on conventional policies, for example (although that can change if they lose their no-claim bonus).
Black boxes could ultimately squeeze some drivers out of the market if the data they collect isn’t used properly. The ABI told its members earlier this month that they risk a regulatory backlash unless they take “great care” to ensure their use of personal data doesn’t leave sections of society unable to secure affordable cover.
But Crowder believes telematics should play a key role in government policy towards younger drivers by promoting safer driving and in the process helping cut the high number of road deaths among young people.
“It’s time the Department for Transport finally gets to grips with what is really a national tragedy and the Department for Education recognised that helping youngsters get through the risky early years behind the wheel alive and safe is an education well worth providing,” he said.
Ignorance is bliss for many over students loan repayments
More than half of Scots paying off a student loan admit to not knowing how much they are being charged for it, new research shows.
Three in ten adults north of the border have a student loan they still haven’t cleared, according to the Debt Advisory Centre Scotland, (DACS), including one in eight who believe they’ll never pay it off.
Of those who haven’t started paying it back, 13 per cent said their income was below the threshold of £16,910. The average repayment among those who are paying it back is £75.50, with 10 per cent paying more than £200 a month.
The fee-charging debt advice provider also found that 56 per cent don’t know how much interest they are being charged on their loan repayments, while 49 per cent couldn’t state approximately how much they had left to clear.
But 40 per cent claimed not to worry about their student loan and the same proportion said they didn’t classify it as a debt.
Ian Williams, spokesman for DACS, said: “While students in Scotland may not be as likely to get into as much debt as those in England, Wales, or Northern Ireland, they could still take out relatively big loans for their maintenance and living costs. However, most graduates seem to be relaxed about this, as so many don’t consider it to be debt.”