Cost of car insurance now gobbles up 10% of a young driver's average salary

Further evidence of the need to tackle rising motor insurance premiums - the cost of car insurance now gobbles up 10% of a young driver’s average salary

• 10% of a young driver’s average annual salary now goes towards paying their motor insurance bill – the equivalent of all their salary over the first 37 days of the year, 1 January to today, 6 February. 
• Yet further evidence of why action is needed to help ease cost pressures on premiums.

Further evidence on the need for reforms to help stem rising motor insurance premiums is published today by the ABI.

ABI analysis shows that 10%¹ of the average salary of drivers aged 18-21 now goes on paying their motor insurance bills - an average of £973 for comprehensive cover. This is more than five times the average proportion among all other drivers and equates to all their salary from 1 January to today, 6 February. This highlights that younger drivers are feeling the impact of rising motor insurance bills, caused by factors such as the current way compensation pay-outs are calculated and a resurgence in whiplash-style claims, the hardest.

• 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 other 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.”

-ENDS-

Notes for Editors

Enquiries to:

Malcolm Tarling 020 7216 7410 Mobile: 07776 147667
Sarah Cordey 020 7216 7375 Mobile: 07860 189071
Dominic Stannard 020 7216 7350 Mobile: 07889 641702
Melanie Fernandes 020 7216 7660 Mobile: 07720497617

1. ^1.ONS 2016, Annual Survey of Hours and Earnings (ASHE), Age Group Table 6.7a
2. The Association of British Insurers is the voice of the UK’s world leading insurance and long-term savings industry. A productive, inclusive and thriving sector, we are an industry that provides peace of mind to households and businesses across the UK and powers the growth of local and regional economies by enabling trade, risk taking, investment and innovation. 
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4. More news and information from the ABI is available on our web site, www.abi.org.uk.