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11

Young drivers underestimate cost of first policy

Open-access content Wednesday 11th November 2015 — updated 10.05pm, Wednesday 6th May 2020

More than half of young motorists do not budget enough to pay for car insurance in their first year of driving, a survey has found.

A poll of 500 drivers aged between 17 and 24 showed 56% expected their first premium to be under £759. But the survey, commissioned by the RAC, said the average insurance cost for under-25s was £810 a year, citing the figure from the Association of British Insurers.
The survey also reported 17% of respondents budgeted £750 to £999 for the cover and 15% set aside £1,000 to £1,500. One in 10 (9%) prepared a budget between £1,500 and £2,000 while just 5% planned on their insurance costing more than £2,000.
The firm said insurance was the main reason for people of this age group not getting a car, as cited by 62% of respondents. Some 22% felt the cost of a car was the greatest barrier as opposed to 12% who said day-to-day running costs was a factor.
In terms of arranging insurance in the first year of driving, 51% said they had help from their parents. Four in 10 (43%) paid their premium in one go with a similar percentage (44%) opting for monthly payments.
RAC insurance director, Mark Godfrey said: "The cost of car insurance for young and new drivers is unquestionably high due to the high cost of claims, and unfortunately we expect it to increase over the next few years, which will make it even harder for young drivers to get motoring.
Godfrey said having a telematics device fitted would be "fairer" for young drivers as they could be judged on their own driving ability, and potentially get cheaper premiums and renewals. He added 64% of the young drivers surveyed said it would make them drive more safely.
"What's more, two thirds of young drivers (67%) whose parents are involved in the car insurance decision said their parents would prefer them to have a telematics policy," Godfrey said.

This article appeared in our November 2015 issue of The Actuary.
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