Forcing down prices for young drivers could have far-reaching consequences
Equalities Bill could have 'far-reaching' consequences
Monday, 30 Jun 2008 16:10
The new Equalities Bill may have far-reaching consequences for the motor insurance industry, according to USwitch.com.
The price comparison website said although young drivers, aged between 17 and 25-years-of-age, only make up seven per cent of the car insurance market, they are paying 22 per cent of all premiums across the industry because of the higher risk associated with their age.
If the government does not exclude financial products from its Bill, aimed at tackling age-based prejudice, all age groups may find they are subsidising this group.
Ashton Berkhauer, insurance expert at uSwitch.com, said: "In theory, the Equalities Bill could mean the end of the road for higher premiums for young drivers.
"However, insurers have to price by risk and there is clear evidence that younger drivers are more of a hazard on the roads. If the Bill calls for pricing to be equal across age groups this could lead to a rise in premiums for lower risk, safer drivers, who would effectively be subsidising their higher risk counterparts."
This is not the only risk in such a Bill, uSwitch warned.
"There is also a danger that many more 'boy racers' will find that they can afford to insure faster, flashier cars - we could see accidents increase as a result. This would be wrong and we urge the government to seriously consider all the implications before implementing any change."
Young drivers can shop around to avoid paying more than they need on their policy, USwitch suggests. Insurance is also an important factor to take into account when you buy your car – opting for a sportier make with a bigger engine can add thousands of pounds to its cost.
Some young drivers in high-risk areas could be paying up to £14,600 to get comprehensive cover for a sporty second hand car, such as a Golf GTI, which costs less than £5,000 to buy, the company said.