Young drivers hit in biggest annual premium increase

The latest benchmark AA British Insurance Premium Index shows no respite from fast-rising premiums, as another record high is reached.

Over the past quarter, motorists absorbed an increase of 11.5 per cent according to the Shoparound index, which is an average of the cheapest three quotes for each ‘customer' in the Index basket of 2,800 risks.  But over the 12 months ending 30th September the Shoparound cost of an annual comprehensive car insurance policy had risen by 39.3 per cent to £792, the biggest annual jump recorded by the Index. 

Young drivers are being hit with the biggest premium increases.  Over the past 12 months the average cost of insurance has jumped by 51 per cent for those aged between 17 and 22: after shopping around for their cover, men of this age can now expect to pay an annual premium of around £2,500 and women £1,400.

Simon Douglas, director of AA Insurance, says: "Recent road casualty statistics from the Department for Transport show that a third of men who are killed or seriously injured on Britain's roads are under 25, while the number of young passengers who die in car crashes exceeded the number young drivers killed for the first time in six years.  Indeed, car crashes are by far the biggest threat to life amongst young people - considerably more than drugs or knife crime, for instance.

"These are shocking statistics that underline why insurance premiums for young drivers are soaring.  Multi-million pound injury claims are no longer unusual."

Douglas adds: "It's vital that the insurance industry, road safety organisations and the government work together to stem this terrible toll on young lives."

The AA already offers ‘Drive Smart' courses and, for those who have been involved in car crashes or have driving convictions, they are free through the AA Charitable Trust.  In addition, the AA is sponsoring a new BTEC qualification in driving behaviour, while a new insurance product that rewards good driving is expected to be launched next year.

But all drivers have been affected by fast-rising premiums over the past 12 months.  Douglas says that recent years have seen intense competition encouraged by the growth of price comparison sites, which had kept premiums artificially low to the point that many insurance companies were making large losses on car insurance business.

"Five years ago we warned that sharp premium inflation would be the result of this competition but recession has added to the pain.  A proliferation of personal injury claim lawyers has also led to the number of injury claims across the board sharply increase, while fraud has eaten into insurers' costs to the extent that over the past year, for every £100 taken in premiums, £123 has been paid out in claims," he says.

Premium increases will continue through into 2011, Douglas believes.  "Although the quarterly increases are a little less than the previous quarter, the annual increase was the largest since the AA Index started in 1994, I expect premium inflation to be less severe in future."