Despite a long-held belief that young drivers make more claims on car insurance and pay the highest premiums, new research has revealed that the cost for young people to insure a vehicle is falling.
Compared to one year ago, under 25-year-old male drivers are 13 percent better off on average, while young female drivers pay 10 percent less for the average car insurance premium, according to Canstar research.
Steve Mickenbecker, head of research at Canstar, said families with young drivers were marginally better off, at the expense of older drivers.
“The drop in premium prices for young drivers has to be a planned marketing ploy to attract the younger drivers and hopefully retain them, as they will prove more profitable to the insurers as time goes by,” he said.
“In these days of virtual back-to-back natural disasters around the country, we thought we’d be looking at hefty increases across the board so it was very much a surprise to see that young drivers are the beneficiaries of lower premium prices.”
Not all drivers fared better compared to last year; the average car insurance premium for drivers aged 30 to 59 years rose by 6.97 percent, while premiums for mature drivers increased by 7.37 percent on average, according to the research. Male and female drivers in the 25 to 29 years bracket are worse off compared to last year, with average premiums up by 2.91 percent and 6.93 percent respectively, Canstar found.
Older drivers show greater inertia when it comes time to renew their car insurance policy, while younger drivers tend to shop around on price before agreeing to one policy, according to Mickenbecker.
“One factor that doesn’t always work in the customer’s favour is automatically renewing their car insurance when the annual renewal slip arrives in the post,” he said.
Damian Smith, chief executive of RateCity, said car insurance premiums are largely set by the competitive landscape, and over the past decade, that landscape has favoured a couple of big insurers versus the rest of the market.
“In keeping with the previous car insurance surveys we’ve done, the lowest premiums often come from the “challenger” brands. These are smaller insurers, many of whom have entered the market in recent years,” he said.
“Car insurers won’t reduce premiums or moderate their premium increases out of the goodness of their hearts. Competition is the only thing that can achieve this. The more drivers that shop around, looking for better premiums and features, the more pressure will be put on car insurance companies to keep their premium increases under control.”