Car insurance premiums for young drivers need to switch to charging for how they drive rather than the car they own.
The move would be a major change from pricing car cover on the potential risk related to driving certain vehicles rather than assessing a driver’s skills and past performance.
Assessing performance rather than risk would make car insurance cheaper and bring more young drivers on to the road as well.
Telematics firm Cobra is urging car insurers to consider a new charging model when new European rules ban basing insurance costs on gender from the end of next year.
Cobra believes assessing driving performance would solve two problems –
- By bringing down the rising costs of car insurance
- Stop falling car sales because young drivers cannot afford to purchase and insure vehicles
Cobra sees a comparison between how starving young first time buyers of mortgages has strangled the housing market and how high insurance costs could do the same for the car market.
The firm cites a study by the Department for Transport that found only 35 per cent of 17-21 year olds hold a full driving licence, while the remainder blame high insurance costs stopping them from getting behind the wheel.
“Manufacturers have to sit down with insurance companies to see how they can speed up the process of moving to a driver behaviour-based insurance platform,” said Andrew Smith, managing director of Cobra UK.
“No manufacturer or insurer would agree to reduce premiums for a 17-year-old driving a Ferrari, but young people should not be discriminated against if they want to drive their parents’ Nissan X-Trail or VW Touran.”
Several companies already provide insurance policies that offer young drivers lower premiums if they prove they are safe drivers.
The Co-operative has a pay-as-you-drive scheme that uses telematics to assess the time, distance and location of journeys to determine insurance costs.