Car insurance price drop – Young drivers to benefit from running cost reduction

0
22


It has long been known that young drivers pay the most to run their car. Insurance is sky high due to the fact they are low on experience and therefore a higher risk. However, despite the fact they are the motorists that typically have to fork out the most running costs for them have dropped over the past few months. New data has found that the cost of running a car for young drivers has dropped by 2.6 per cent in the past six months, according to comparethemarket.com’s latest Young Drivers report. On average, a 17-24-year-old driver will now pay £2,231 to run his or her car in the first year, of which more than half (£1,220) is the cost of insurance.

Costs for young drivers hit a peak in 2016 rising to £2,397, so the recent price drop will come as welcome relief.

Insurance costs for young drivers have continued to decrease after a long period of rising premiums.

Over the past six months, the average premium for a 17 – 24-year-old dropped by 4.7 per cent to £1,220.

Over the past year, premiums for the age group have fallen by 7.9 per cent which equates to £104.

On average, the cheapest premium for 17 – 24-year old’s has dropped below £1000 for the first time in years and now stands at £994 – over £226 lower than the average premium.

The reason why drivers could be losing out on the top savings is potentially due to driver sticking with the same insurer instead of shopping around.

The fall in insurance costs follows a period of significant hikes, primarily driven by Government changes such as Insurance Premium Tax increases and changes to the ‘Ogden’ personal injury discount rate.

Changes to the ‘Ogden’ personal injury discount rate – used to calculate compensation for large payouts to those with life-changing injuries – which was announced in February 2017 forced insurers to increase the amount that they charge to cover the larger claims that the rate would set.

More recently the Government announced an increase in the rate from -0.75% to -0.25%, which insurers were expecting to be higher.

Alongside the discount rate change, the Government announced a number of increases to insurance premium tax (IPT) which doubled from 6% to 12% in a 2-year period from 2015.

The higher taxes on policies pushed up the premiums for customers by an average of £165 for young drivers. The tax disproportionately affected young people as the average increase for all ages stood at £66, meaning that those could afford it least was made to pay the most.

Simon McCulloch, Director of Commercial at  comparethemarket.com, said: “Whilst the overall cost of motoring for young people has fallen in the first half of the year it remains unreachable for many, with insurance alone making up over half of the cost of getting on the road.

“Our research has found that more than a quarter of young people fear that they would risk losing their job if they could no longer afford to drive.

“The high cost of insurance is primarily a result of multiple Government changes which have weighed heavily on premiums.

“The Insurance Premium Tax has doubled in recent years, and the disappointing changes to the Ogden Rate, which was expected to be a lifeline for young drivers, will do little to help bring down the cost of insurance.

“The Government needs to address the high cost of insurance for young people to ease one of the main financial burdens of car ownership.”

LEAVE A REPLY

Please enter your comment!
Please enter your name here