Why do some motor insurance specialise in just young drivers?

Insurance companies are different. They all have differing priorities, and marketing strategies. Some will take on insurance only when there is a small amount of risk associated with it. Some, though, will try and take on insurance that could be high margin. "Could" is the important word here, because high-risk insurance may lead to higher premiums, but could also lead to higher payouts.

Take young, newly qualified drivers. They are statistically more likely to have an accident than most categorizations of drivers. Thus, you can charge them higher motor insurance premiums. On the other hand, you are more likely to be paying out big money after accidents involving them.

But the difference between young drivers and other types of high-risk driver is that not all young drivers ARE actually high risk. What is true is that ALL young drivers start driving with no insurance history, and thus no claims history, and no chance for a no-claims bonus. Thus, their premiums are high from the start, and higher profits can be made. Add the extra premium for the perceived higher risk, and you can see why some insurance companies may want to target young drivers.

So, it is unfair to categorize all young drivers as bad drivers. But it is not totally unfair. There are some facts behind the decision that do make sense.

Firstly, there is the driving test. Most accidents are about judgement, not necessarily about skills. You can't be taught judgement, it comes from experience. Young drivers don't have this, and the driving test only tests lower level skills. So passing the test is easy for bad drivers.

Part of the judgement issue is the ability to recognise when danger is afoot. Research has shown that young drivers take up to 2 seconds more to do this, and when you extrapolate this to accidents, young drivers are 9 times more likely to be at fault when an accident happened than someone aged 31-40 with the same experience. For every mile driven, a 17-year-old male is 7 times as likely to have an accident than a middle-aged man. Young drivers make more journeys at night, which can explain why they are involved in more accidents.

Then there are passengers. If you cover a young novice driver, you are covering their passengers under third party insurance, and they face more risk of being involved in an accident. One extra passenger has been found to make an accident twice as likely. Adding two or more passengers can make accidents 5 times as likely. Young drivers are likely to have more passengers, as their friends may not be able to drive.

To cover these risks, insurers charge higher premiums, which is why they might specialise in young drivers.

 

 

 

 

 

 

 

 

 

 

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Motor Insurance

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