Skip to content

Will Telematics Drive Down Young Drivers Insurance Premiums?

Over the past few years insurance premiums for young drivers have increased to the point that, for some at least, they are completely unaffordable. The situation got worse for young female drivers at the beginning of the year when an EU ruling meant the insurance companies could no longer give lower premiums to female drivers, even though they are statistically less likely to have an accident.

Over the past few years insurance premiums for young drivers have increased to the point that, for some at least, they are completely unaffordable. The situation got worse for young female drivers at the beginning of the year when an EU ruling meant the insurance companies could no longer give lower premiums to female drivers, even though they are statistically less likely to have an accident. The insurance companies argued to no avail that this was a legitimate estimate of risk based on well understood statistics. The traditional young person's strategy of getting insured as an additional driver on parental insurance policies has now come under much greater scrutiny too. If it is found that the young person is actually the main driver of the car, the insurance companies potentially won't pay out in the event of an accident.

 
It seems then that insurance costs are going to place motoring beyond the reach of many young drivers but help may be at hand in the unlikely shape of a small black box of electronic wizardry. The relatively new technology of telematics places a monitor in the young person's car which records various aspects of their driving behaviour. Using GPS and motion sensing technologies the box can record hard acceleration and braking while observing the driver's adherence to speed limits. This information is then transmitted back to the insurance company. Using this data the insurance company can then reward drivers who drive carefully with lower premiums. A typical system starts by allocating the driver with 100 points. Points are then deducted every time the box records aggressive driving or speed limits being broken.
 
In this example, premiums are adjusted quarterly and if the points drop below 60 then the premium for the following quarter is increased. If the driver improves his driving in the following quarter however, his premiums will fall again. The system might at first seem a little complex but for many young drivers it could be worth it in the reduced premiums that they pay. Savings for many young drivers can reach 50% over normal policy costs and in some cases can be as much as 70%. There are inevitable concerns about the big brother connotations of having a spy in the car but the economic advantage gained by young drivers may prove to outweigh these issues. Moving forward it can be seen how the use of such systems might spread in response to legislation which prevents the insurance companies 'discriminating' against drivers based on their gender or other factors.

Posted by on

Back to February 2013

Back to top