Further evidence on the need for reforms to help stem rising motor insurance premiums is published today by the ABI.
Just over 10% of the average annual salary of drivers aged between 18-21 is now going on paying their annual motor insurance premium. While the increase in telematics policies that monitor driving behaviour has helped stabilise costs for some, this is five times the average proportion of the typical salary for all drivers that goes on motor insurance.
Today is ‘Insurance Freedom Day’ because the proportion of a young driver’s typical salary, at 10%, that goes on paying their motor insurance premium represents 37 days earnings – or the equivalent to all of their earnings between the 1 January and today, 6 February. The average proportion across all other drivers is 2% of salary, with drivers aged 50-59 paying the lowest proportion at 1.30% of salary on average.
More than any other sector of the driving population, young drivers need the Government to act to help them manage their motor insurance bills. This is why the ABI is urging the Government to act by:
Introducing without delay its reforms to how compensation for large personal injury compensation awards are adjusted (known as the Discount Rate) to ensure a fairer system for claimants, insurance customers and all taxpayers.
Pushing ahead with reforms to how lower value whiplash-style claims are handled. Since 2013 there has been a rise in these claims reported to the Government’s Compensation Recovery Unit.
Freezing the rate of Insurance Premium Tax, which currently stands at 12%.
Implementing Graduated Driver Licensing (GDL) to protect both young drivers and those already on the road. Many countries have adopted GDL and have seen a significant improvement in the safety record of young drivers as a result.
James Dalton, Director of General Insurance Policy at the ABI, said: “More than any James Daltonother drivers, young motorists need relief from rising motor insurance premiums. While telematics technology is helping many young drivers manage their insurance bills, cost pressures keep mounting. The Government has a key role in helping keep motor insurance costs under control, and this latest analysis highlights why they need to implement their proposals to reform personal injury compensation and lower value whiplash-style claims as soon as possible.”
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