The Association of British Insurers is calling for swift government action.
One-tenth of a young driver’s average salary is now spent on car insurance, according to new research.
Analysis by the Association of British Insurers (ABI) showed that drivers aged between 18 and 21 spend an average of £973 on car insurance, despite their average salaries being just under £9,400 a year.
As a result, young drivers are spending just over 10 percent of their salaries on insurance – five times more than the average for drivers of all ages, which stands at around two percent.
James Dalton, director of general insurance policy at the ABI, said so-called ‘black box’ telematic policies were keeping costs down slightly, but young drivers needed more help from government policy on compensation and whiplash-style injury claims.
‘More than any other drivers, young motorist need relief from rising motor insurance premiums,’ he said. ‘While telematics technology is helping many young drivers manage their insurance bills, cost pressures keep mounting. The government has a key role in helping keep motor insurance costs under control, and this latest analysis highlights why they need to implement their proposals to reform personal injury compensation and lower value whiplash-style claims as soon as possible.’
RAC Insurance’s managing director, Mark Godfrey, said the government’s decision to increase insurance premium tax to 12 percent had disproportionately affected young drivers, who are already paying high premiums.
‘Young drivers as they are already paying the highest premiums due to their greater likelihood of being involved in an accident, therefore the impact of the tax rise comes on top of their premium making it even more expensive,’ he said.
‘Telematics-based policies are proving ever more popular, but they are still subject to insurance premium tax at 12 percent, which we believe they shouldn't be. We call on the government to consider reducing the rate of tax for young drivers who take out black box policies.'