9th February 2016

Why we shouldn’t discriminate against young drivers

The Northern Ireland Executive has announced reforms designed to reduce road accidents involving young drivers, including an increased minimum learning period, a more structured syllabus and restrictions on the age and number of passengers a young driver can carry at night.

The measures have been well received, and there have already been calls form some insurers and the ABI for similar changes across the UK. Change is unarguable. Far too many young people in the UK and elsewhere are dying as a result of car accidents.

The problem with the Northern Irish change is not the intention but the method.

According to the 2015 Intergenerational Fairness Index there has been a 10% decline in the prospects for young people between 2010 and 2015. UK youth unemployment is almost three times as high as Germany. Furthermore, average incomes for 20-year-olds fell by 12% between 2007 and 2012 and remain stagnant. Rising house prices, lower spending on education and the soaring cost of an aging population will make the future tough for today’s teenagers.

Having a car helps youngsters get a job, especially in rural areas. The average cost of a driving lesson in the UK is £24 – so for those young people following the DSA’s recommended 47 hours of tuition will have to pay £1,128 to learn to drive. Although, thanks to telematics, average premiums for young drivers have fallen in recent years, a recently qualified driver under 23 can still expect to pay an average of over £1900 for their car insurance. The recent hike in IPT will have added over £60 to that number.

Improving driver training and testing will make for safer drivers, but young people cannot afford to pay for it, and the companies who provide the training won’t want to absorb these extra costs and neither will the government. So these new rules will reduce the number of young people who can benefit from owning a car and the prospects it brings.

If we’re going to require young people take more lessons or restrict their ability to car share at night, the authorities should provide driving education via the national curriculum, or offer free or heavily discounted night time public transport. The argument is often made that car accidents represent a significant burden on the public purse, so why not invest in doing something significant and positive which could radically reduce these costs in the long term?

If Government is unwilling to dip into the public purse, why not provide a fiscal nudge instead to encourage young people to opt for telematics-based car insurance?  Carrot and many other telematics insurers specialise in using data to quickly identify which young drivers put themselves at risk.

At Carrot we incentivise our young drivers via premium refunds to encourage and reward safe driving. These incentives keep the vast majority of our drivers engaged with the programme and continually conscious of their driving style and the risks they face.

Dangerous drivers are quickly identified and intervened with in an effort to improve their performance, but if they continue to drive dangerously and ignore our three formal warnings, we will withdraw cover.

Our method works. Our telematics insurance programme has delivered a 42% reduction in accident frequency when compared with an equivalent young driver insurance book with no telematics-led intervention. This means our insurers make more profit, our customers get cheaper premiums and society enjoys fewer accidents on the roads.

Telematics insurance is already reducing premiums for young people and making significant improvements in road safety. Instead of introducing new legislation which will inevitably lead to increased costs for our already economically disadvantaged young people, the UK government should remove of the 9.5% IPT charge for those new drivers who opt for a reputable telematics insurance programme during their first year of insurance.