Driving down the cost of car insurance for young men

YOUNG men have borne the brunt of sharp increases in the cost of car insurance in recent years, with extortionate premiums forcing many off the roads and causing a rise in collisions involving uninsured drivers.

Car insurance costs for male drivers aged 17 to 22 have soared by 40 per cent in the last two years, while those aged 23 to 29 are paying 35 per cent more than they were in early 2010, according to AA Insurance figures.

That has helped push up the number of uninsured drivers, putting covered drivers at risk of costly accidents.

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But there are signs that the tide is turning as insurers seek to ease the pressure on young male drivers. New car insurance technology that rewards careful driving with lower premiums is being adopted by more large insurers and premiums are settling down after sharp increases over the last two years.

Peter Harrison, car insurance spokesman at MoneySupermarket.com, said: “Although younger male drivers still pay much higher premiums than other UK motorists, they no longer seem to be increasing at the alarming rate they were during this time last year. The current market is very competitive for all motorists looking for a good value deal.”

But young women have seen their costs begin to edge up – and they are likely to continue rising, thanks to a new European Court of Justice (ECJ) decision banning insurers from using gender as a factor in pricing.

Drivers renewing their insurance after the ruling comes into force on 21 December will have their premiums adjusted to reflect the change. That will mean higher costs for young women, with premiums expected to soar by up to 25 per cent. However, young men will see costs come down as a result.

Young women currently pay premiums around half those faced by young men. The average fully comprehensive car insurance policy for a 17- to 20-year-old female in the first three months of this year was £1,869, compared with the £3,635 average cost for men of that age, the latest Confused.com/Towers Watson index revealed last week.

The difference reflects the higher risk of young male drivers being involved in serious car accidents, with the road casualty rate among young men double that for young women.

Car insurance claims for male drivers aged 17 to 19 average out at £4,473, according to the Association of British Insurers, compared with a typical claim size of £2,734 for women of the same age.

Gareth Kloet, head of motor at Confused.com, said: “Encouragingly, 17- to 20-year-olds have seen decreases in average premiums and this statistic alone could signal that price rises for young male drivers are at end.”

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However, the research also revealed that women in parts of the UK saw their premiums rise by almost 10 per cent in the first part of this year.

“Overall we’ve seen insurance prices come down marginally but some women are seeing significant increases in their premium,” said Kloet.

“The European Union gender equality law bans the use of gender as a factor in calculating the cost of an insurance policy and comes into effect on 21 December 2012. As a result, we expect women everywhere to see hikes to their car insurance costs.”

The good news for young males is that their costs will come down as the gender gap narrows, according to Ian Crowder, spokesman for AA Insurance.

“This ruling will have the greatest effect on young drivers because they currently represent the greatest premium difference between the sexes. Young women are initially likely to find their premiums increase by between 11 and 25 per cent (depending on whose calculations you take) while those for young men will fall by anything up to 10 per cent.”

Kloet agreed: “As the deadline for implementing the changes required to comply with the ECJ ruling fast approach, our research and strong suspicion suggests that premiums for men and women will converge, with males benefiting more than females.”

The good news for young male drivers doesn’t stop there. They are also the biggest beneficiaries of the wider use by car insurers of so-called smart-box technology, which rewards safe driving behaviour with reduced premiums.

“In recent years, insurers have taken a number of steps to help assess risk more accurately and black boxes similar to those used on planes are increasingly being offered to drivers in order to assess driver performance, with the technology providing evidence of good driving, resulting in lower premiums, with reckless behaviour having the reverse effect,” said Kloet.

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The telematics technology works by using smart or black boxes in the car to track where it is, the speed at which it is driven, the way it is being driven (recording cornering speeds, braking and so on), the time of day it is on the road and other such factors. Those data are then used to help set the level of premium charged.

“Those who drive in a risk-averse manner will score well and scores will influence premiums,” Crowder explained. “It places firmly in the hands of the driver ownership of safe and responsible driving. The system is genuinely gender-neutral, rewarding or penalising drivers regardless of whether they are male or female.”

Several insurers have adopted the technology over the last two years after a previous attempt by Aviva (then Norwich Union) to introduce it to the market ended in failure.

Specialists Insurethebox and Coverbox led the way and major insurers, including the Co-operative and AA Insurance, have followed over the last few months. The Co-op claimed last month that drivers whose cars had been fitted with a smart box were 20 per cent less likely to have an accident than motorists with conventional insurance.

The boxes gives young male drivers the opportunity to demonstrate to insurers that they drive safely and don’t pose the level of risk associated with young men on the road.

Johan van de Merwe, managing director of coverbox.co.uk, said: “This is incredibly useful for younger drivers – and rewards that majority who do drive sensibly rather than tarring them with the same brush as more reckless younger drivers.”

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