It’s great being young, but not if you want to insure a car. All the stats show that as a group, teenagers carry the highest risk for motor insurers. Even though some are good and careful drivers, others are a complete danger.
Drivers aged 17-24 only make up 7% of UK licence holders and drive fewer miles than the average but are involved in 24% of all fatal collisions, according to the Association of British Insurers (ABI).
Even the cost of insuring a modest small car is high. For an example, looking at data provided to us by Compare The Market between June 2021 and May 2022, an 18 year-old who lives in the North West of England and obtained a full UK licence in the last year was looking at an average annual £1,402 for an entry-level Fiat 500.
The only way to get a good insurance record is to keep driving safely and over time build up a no-claims discount, but while the early years will be the most costly there are ways to lower the bill.
The starting point is choosing a low power, low value, (but still safe) car in a low insurance group. Then apply any of the price-reducing factors for anyone insuring a car: park off street if you can; lower the mileage and specify a higher excess.
Who’s driving?
It can be tempting for a parent or older person to pretend that they are the main user of a teenager’s car to save money on insurance premiums, and then add them as a named driver. But if the younger person is actually driving it on a regular basis this is illegal. Insurers call it ‘fronting’. If an insurer discovers that a person is guilty of fronting, their policy could be declared invalid and they could be forced to pay any costs that arise as a result of an accident. It can also lead to criminal convictions.
Conversely, if the young driver can insure their own car, adding an older, named driver onto the policy can reduce the premium, because the risk is being spread. To return to the example of the 18-year-old in the Fiat 500, the average premium with a parent added as a named driver reduces the average £1,402 to £1,297.
Black boxes
It’s agreed that the best way young drivers can lower their insurance is with telematics motor insurance policies, often known as ‘pay how you drive’ or ‘black box’ insurance. Telematics policies primarily use GPS technology to measure how a vehicle is being driven. Insurers then use this information to make decisions about risk based on driving performance. This information is considered together with other traditional risk factors, such as a driver’s age and where they live, to set premiums. ‘Safe’ drivers will usually benefit from lower premiums than ‘less safe’ drivers.
Many young people aren’t keen, as they feel as if they’re being spied upon, but if they are careful behind the wheel, black box insurance will the best option. According to analysis by compathemarket.com in May 2022, more than three quarters (78%) of drivers aged between 17 and 20 could save an average of £1,137 by choosing a telematics policy instead of a regular car insurance policy.
There are specialist insurers who cater for young drivers. One of the longest-established, Marmalade, offers a specific named-young-driver-insurance. It has a telematics policy for driving a parent’s or grandparents’ car (a tag and an app know who’s driving), it also offers a telematics policy for young drivers in their own car as the main driver.
Temporary insurance
For many young drivers an annual insurance policy may not be needed, and here’s where the growing market for temporary, or pay-by-the mile car insurance comes in. For example, many young people may only want the use of a car when they are home from college or university.
Again, Marmalade uses a black box for its Pay as You Go Insurance policy on a parent’s car. You start with 500 miles and arrange auto top up of 100 to 500 miles when there’s 50 miles left. Unused miles are valid for a year. Prices start from £175 for 500 miles – with top-ups from £18. The driver still earns no claims bonus for a trouble-free year. Another company, go shorty offers time-based car insurance for ages 18-75 from one hour to 28 days to drive cars which don’t belong to you.
For further information, visit the Association of British Insurers website, and check out the section on younger drivers.
