Learning to drive is increasingly expensive and out of the reach of many young people, whose chances of securing work – already reduced – are further diminished if they cannot drive. David Homewood FRSA argues that insurance companies need to be encouraged to find ways of overcoming this barrier.
As the fall out of the credit crunch bites and the cost of living rises, it is becoming increasingly clear that today’s young people face very different economic conditions to, not just compared to their parents, but to every generation since the Second World War. As youth unemployment and housing costs rise, travel becomes even more important.
Yet, if anyone wishes to start driving these days they, or their parents, are looking at a total cost of at least £5,000, and more often £10,000, in their first year. This is as much as the cost of a year at university. Of course, both are important when trying to get a good new job; the difference is that a student is able to get help to pay for university – grants and low cost loans repayable only after having got a reasonable job – but there is no help towards the cost of starting to drive.
The cost of a provisional licence (£50), driving lessons (20 hours for £500), extra insurance to drive your parent’s car (£200), the driving tests (£93), a full licence (£50), and the purchase of a second hand car (perhaps £1,700), road tax (£130), car maintenance, MOT, and 900 litres of petrol to do only 20 miles a day on average (about £2,000), totals about £4,700.
All this may seem reasonable and justifiable in the age of climate change, reduced public spending and rises in fuel prices, but the new young driver is asked to pay an additional £3,100 (the lowest amount quoted by the main insurance companies and comparison web sites), or £7,000 (quoted by many insurers).
Worse still, insurers frequently demand a high excess of several thousand pounds in addition to the very high premium. Whilst it is appreciated that new young drivers are more likely to have an accident than older more experienced drivers, there must be a question as to the reasonableness of demanding such a massively higher premium and in addition demanding a very large excess; this suggests that insurers are covering themselves twice over.
Furthermore, these costs are making it so difficult for a young person to find this very high premium, that it will prevent some from driving and persuade others to break the law and risk driving without insurance. It also fails to reward those that drive carefully and have no accident, providing no incentive to the new driver to do so carefully.
As I understand it, there is at least one insurance company that offers to reduce the cost of insurance for drivers who agree to fit a meter to their car, which records the speed at which they are driving, any occasion when they break the law or drive badly and so on. There are two problems with this seemingly good idea. The first is that it is only one of the smaller, less well known companies. The second and main problem is that even they start by charging the same high premium and only reduce it when drivers prove themselves competent. In effect, this approach actually increases the amount the poor beleaguered driver has to find to start driving (by the cost of fitting the meter), and only reduces it later. It would be more helpful if they allowed the driver who fits the meter to enjoy a more normal premium and increase it if the driver fails to drive properly.
There is a real danger with the current level of premiums that it will prevent many young people from starting to drive and seriously hamper their chances of gaining employment. This must be affecting about a million potential new young drivers every year and will impact on almost every family at some time.
Is it not time to help find another way? Can we not help insurance companies recognise the problems they are creating for our young people and for employment and to find ways of more fairly spreading the cost of insuring new drivers?
Amongst the many Fellows of the RSA, there must be many with ideas to overcome this problem. Surely there are many Fellows out there who work within the insurance industry or large driving schools, and whose businesses must be reduced when less young people start to drive? How about persuading your business to promote discussions or seminars on this important matter? Why not suggest your ideas to the RSA, and persuade your company to offer to support further thinking in this area?
David is a retired economic development consultant to local authorities and general manager in international fast food companies, now doing voluntary work for local charities.