Guaranteeing Insurance for the Young

I wonder if it’s time for the insurance companies to come up with some compromise that will help parents and children get out on the road without bankrupting them before they’ve even started their lives; a ‘guarantee’ system, perhaps?

Having just been involved in a car crash myself, and being in the messy middle of changing from one insurer to another as it happens, I can appreciate some of the dilemmas that insurance companies have to go through when one of their customers cocks it up a bit.

But I can’t help feel sorry for young drivers, and the news today that over 40% of parents ‘front’ their children’s insurance in order to help them get on the road doesn’t really come as a surprise.

After all, according to a BBC report today, for an average 17-year-old the cost of insuring a bog-standard Vauxhall Corsa would be somewhere in the region of £4’000.  That’s quite ridiculous, even allowing for the fact that young drivers pose a risk on the road.

A basic, brand new Corsa costs barely £9’000, meaning that insurance premium is half the car’s value before you get started.  And that’s just for one year…

There are literally dozens of second-hand Corsas for sale and such insurance premiums often mean that youngsters are paying more to cover themselves on the road than they paid for the vehicle in the first place.

It’s no wonder, then, that many young drivers are turning to Daddy for help in the hopes that they might circumvent the prices.  The difference in premiums is quite staggering – but then, it is for all of us.  On a recent search for changing the insurance on my own car the prices quoted to me, at the tender age of 38, ranged from £219 to £1’047.50.

Then there are some who might decide that they’ll take the risk and drive without insurance because, as long as they don’t kill anybody, it might be cheaper to just pay the third party to keep quiet and buy a new bumper.  Highly illegal, but much cheaper than taking out insurance without sticking a parent’s name as the main driver.

‘Fronting’ might be deemed insurance fraud, but surely people can understand why it’s done, given the price difference between that and insuring the car yourself.  When I was seventeen I had a two-year-old Austin Rover Metro and insurance groups ran from one through to nine (today it’s one to fifty); my insurance cost me £600 for the year, and it was only that expensive because I’d driven in to the back of my Mum’s Fiesta XR2 when she stopped for a lollypop lady to let kids cross the road.

But at least, at that price, I could afford to insure the car myself – just – and I was completely legal.

I wonder, then, if it’s time for the insurance companies to come up with some compromise that will help parents and children get out on the road without bankrupting them before they’ve even started their lives.

I remember getting my parents to act as a guarantor on my first ever car loan because I didn’t have enough credit history to take one out myself.  Perhaps there could be a system whereby parents ‘guarantee’ their child’s motor insurance.

It would mean the kids get their premiums lower, but still at a price that reflects their inexperience and risk, while their parents’ premiums increases by a percentage to cover their guarantee.  It would be a win-win situation for both customers and insurance companies, because it would mean tying both father and son, mother and daughter in to one insurance company in order for it to work and would take out the apparently heinous crime of ‘fronting’ in an effort to circumvent the currently ludicrous prices young people have to pay.

And it’s worth remembering that, while I appreciate young people do pose a risk on the road, a man of seventy will always get ridiculously cheap insurance because of his age and experience.

Yet how often do we read stories of a modern day Mr Magoo driving the wrong way up a dual-carriageway, leaving carnage in his wake?

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And yes, I am aware of the irony of writing about insurance for the young when I had a crash with an ambulance last week… MJD