Why does age matter when it comes to car insurance?

Friday, 3 July 2015
Younger drivers have always had it tough when it comes to car insurance. Despite recent figures revealing that the cost of car insurance for younger drivers has actually fallen in the last year – down by 10.3%, in fact – those aged 18-24 still pay by far the highest premiums overall. But just why is that?

Well, the simple answer is that it’s because younger drivers are more likely to make a claim – they’re more inexperienced and will probably have an extra knock, bump or scrape as a result – but there’s more to it than that. It isn’t only the number of claims made, but the value of those claims, and figures from the Association of British Insurers (ABI) show that the average claim made by a younger driver is far higher than in the vast majority of other age groups.

For example, drivers aged 18-20 pay the highest average premium of £972, but this is largely because their claims are likely to be expensive, coming in at an average of £3,667 each time. Given that they’re also likely to make more frequent claims than those in other age bands, it’s no real surprise that their premiums are higher. Conversely, the group with the cheapest average car insurance premiums are those aged 66-70 who pay £241, primarily due to the cost of their average claim being relatively low at £2,225.

The table below highlights this in more detail, and as you can see, there’s a definite correlation between age and the average claim – and therefore, the average premium.

Age of policyholder Average premium Average claim
18-20 £972 £3,667
21-25 £649 £2,905
26-30 £502 £2,520
31-35 £426 £2,274
36-40 £378 £2,279
41-45 £343 £2,199
46-50 £326 £2,265
51-55 £306 £2,233
56-60 £277 £2,216
61-65 £252 £2,180
66-70 £241 £2,225
71-75 £255 £2,495
76-80 £291 £2,572
81-85 £352 £2,886
86-90 £415 £3,690
91+ £478 £3,656
SOURCE: ABI

However, what’s particularly interesting is that, while truly older drivers also have high average claim amounts, their typical premiums are still almost half that of younger drivers. But why? Well, this is where the number of claims comes into play. Those aged 86+ typically make fewer claims than their younger counterparts, so although their average claim will still be high, the fact that they’re less likely to make one means their premiums can be lower. Check out the graph below to see this in more detail.

SOURCE: ABI
The pricing of car insurance is all about risk, and as the data shows, there’s a clear link between the age of a driver and the risk of making an expensive claim. But, these aren’t the only risk factors that insurers take into consideration – others include your address, the type of car you drive, how you use it, your driving record and any additional named drivers, all of which could have an impact.

How to keep your premiums as low as possible, whatever your age

That being said, there are things you can do to keep your premiums low, no matter how old you are. Here are a few things you may want to try:

  • Increase the level of voluntary excess. Generally speaking, the higher the excess, the lower your premiums will be (just make sure that you can actually afford to cover the excess amount should you need to make a claim).
  • Pay for your policy in one lump sum rather than on a monthly basis. It may seem more cost-effective to spread the cost over a year, but it can actually end up costing you more, as insurers often give discounts for lump sum payments.
  • Build up your no claims bonus and keep a clean driving licence.
  • Consider fitting a “black box” to your car. A black box or telematics device tracks your driving and could be a great way to reduce your premiums, as some insurers will offer discounts at renewal for those who prove that they’re safe drivers.
  • Don’t modify your vehicle, as this will inevitably lead to higher premiums.
  • Shop around for quotes! As with all kinds of insurance policy, different insurers will have different prices, so don’t blindly renew without comparing all available options – it could be a fast-track way to saving a small fortune.