A new study claims car insures have the chance to overhaul how they charge young drivers by looking at how they calculate risk, says Defaqto, an independent financial industry monitor.
Following the European Court of Justice gender ruling earlier this year, insurers will not be able to differentiate the cost of insurance for men and women from December 2012.
Equality laws also prevent price discrimination based on age.
The problem for car insurers is policy costs are calculated on gender and age, with the most expensive premiums paid by men aged under 25 who insurers say are more likely to have a road accident than any other drivers.
Defaqto reckons this is an opportunity for the insurance sector to reexamine old values and come up with new ways to calculate costs.
Car insurers should focus on three key areas to come in to line with the new laws, urges Defaqto:
- Educate motorists to drive more safely from the first time they take the wheel
- Examine driving habits by fitting ‘black box’ recorders in cars
- Fight fraud by clamping down on ‘fronting’ – often when a parent claiming they are the main driver insures a car for a child to get cheaper insurance premiums
“If premiums continue to increase for young drivers, we could see regulatory intervention to control price,” warned Mike Powell of Defaqto.
“Removing age as an underwriting factor would have a major impact on the pricing and underwriting capability of all motor insurers.
“To take advantage of the opportunities offered by the already challenging young driver market, insurers need to find a solution to the affordability issue while ensuring they do not take excessive risk on to their books.”