How young drivers can beat record insurance costs

The average cost of insuring a car for young drivers has soared to a record high of £3,688, according to figures from moneysupermarket.com - but there are things you can do to keep insurance bills down.

Newly qualified drivers face the steepest annual premiums at around an eye-watering £5,957.

Drivers aged between 17 and 22 could therefore face monthly payments of as much as £546 when opting to pay by instalments, which typically adds an extra 10% onto premiums.

With more than 448,000 young drivers passing their UK driving test each year, many have therefore been forced to give up their dreams of independence altogether – even after saving up for a car.

As one 18-year-old moneysupermarket.com user said on our forum: “I am trying to insure a 1998 1.25 Ford fiesta Vetec after passing my driving test last month.

“I have shopped around and tried adding my mum and dad to my insurance, but it is still £5,000 just for third party cover. It’s very frustrating as I can't afford that and my car is only worth £900.”

Desperate measures

Some young drivers are resorting to dangerous and illegal measures to get on the road.

These include driving with no insurance in place at all. And hiding behind their parents on policies taken out in the older drivers’ names, an approach known as ‘fronting’ that is against the law and likely to result in any claims being rejected.

Research from Co-operative Insurance indicates that as many as 41% of parents illegally front their children’s car insurance during the first few years that the kids are on the roads.

But in the event of an accident, insurers can refuse to pay out all or part of the claim, cancel the policy, and even prosecute for fraud to recover third party claim costs from the policyholder or driver.

And it is not hard for them to identify policies that have been ‘fronted’ by looking at something as simple as whose credit card is regularly used to buy petrol.

Why are premiums so high?

Insurers charge young drivers more because they represent a higher risk – in other words they are more likely to be involved in accidents than older, more experienced motorists.

Figures show that 74% of deaths among young adults are now on the road, and in 2009, more 16 to 19 year-olds died as passengers in cars than those who died as drivers.

However, it is young male drivers who pose the biggest risk.

Fortunately, there is hope for young drivers and it comes in the form of the little black box used for new telematics insurance policies that can slash their premiums in half.

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What is a telematic insurance policy?

A telematics insurance policy measures drivers’ mileage, when they drive, and how they drive - by penalising for sudden braking, excessive g-forces, or cornering at excessive speeds.

Insure the Box, for example, charges policyholders by the mile. Motorists initially pay for 6,000 miles, have the option to top up and receive free reward miles if they drive safely.

Both Co-operative Insurance and young driver specialist Young Marmalade also offer telematic policies designed to cut the overall costs for careful motorists who are prepared to restrict their mileage.

Peter Harrison, motor insurance expert at moneysupermarket.com, said: “With big increases to premiums being seen in the market place, telematic car insurance is growing in popularity as motorists – especially young motorists who cannot afford to be insured otherwise – seek to cut the cost of car cover.”

For a 17-year-old male driver with a Renault Clio, for example, the cheapest standard annual policy comes in at £6,014.

But if the driver opted for a telematic policy with Insure the Box, the premium would plummet to £3,201. While still high, this equates to a saving of more than £2,800 a year.

Anyone found to be driving safely during the first 12 months they hold the insurance is also likely to be rewarded with a much lower premium when he or she comes to renew.

Harrison said: “Some of the renewal premiums being quoted for drivers who have stayed within the terms and conditions are pretty incredible - especially in comparison to the rest of the market.”

This is not the first time that this type of insurance has been on the market as, unlike the new pay-how-you-drive schemes, pay-as-you-drive has been around for some time.

Five years ago, Aviva, formerly known as Norwich Union, started a pay-as-you-go policy which looked at how often and at what times of day a car was driven.

It didn’t catch on and was withdrawn from the market just two years later.

However, the market has changed in the past few years and car insurance premiums have skyrocketed, pushing more drivers to look for cheaper options.

Read the small print

For anyone considering taking out this type of cover to keep costs down, it is crucial to pay attention to the terms and conditions of the policy, though.

Premiums will shoot up again if the insurer offering the policy sees that you are breaking the rules by driving at night or exceeding your mileage, for instance.

If you doubt that you will be able to keep to the terms, perhaps because you live a long way from your school or workplace, this could prove an expensive option as a result.

Are there any other ways to cut young driver premiums?

Young men who are struggling to cope with rising premiums may consider adding a named driver such as a girlfriend or relative to a policy in a bid to bring costs down.

However, this should only be done if the person is genuinely sharing the use of the vehicle - otherwise it is fraudulent and against the law.
Other tips include opting for a relatively new vehicle with a small engine and taking an advanced driving course that will help to prove your ability behind the wheel.

As well as making you less likely to crash, some insurers may take it into account when pricing your policy – and charge you less as a result.

Please note: Any rates or deals mentioned in this article were available at the time of writing.

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