Why motor insurers use age when pricing cover
There are a large number of different rating factors used in setting the price for motor insurance. These include factors associated with the vehicle, where it is kept and the people who drive it. For the latter, age can materially influence both the likelihood of policyholders making a claim and the cost of such claims when they occur.
Impact of age on motor insurance claims and premiums
Chart One shows the percentage of customers claiming per policy, the average cost of a claim and the average premium for different age groups for private motor insurance in 2014 for people aged 18-20, 21-25 and so on in five year bands until age 90. All policies for people aged 91 and over have been grouped together.
Chart One - Average claim, average premium and claims frequency motor insurance by age, 2014
The ABI's data for 2014 shows that:
- People aged between 18 and 20 were almost twice as likely to make a claim compared to 71-75 year olds.
- The average claim for customers aged 18-20 was more than 50% higher than for those aged 31-35.
- The average claim for drivers aged 18-20 was similar to those aged 91 and over. Though the average premium was more than double for the younger age group who were more than twice as likely to make a claim.
- Drivers aged between 86 and 90 were less likely to make a claim compared to 66-70 year olds, but the average claim was more than 50% higher for the older group.
Average premiums for motorists were closely linked to the average claim for all ages, reflecting the higher average claim for young and old drivers, compared to those aged 31-65. Average premiums for those aged 31-70 fall as they get older within this age bracket, reflecting the fall in the claims frequency from 12% to 7% during this period.
If you are finding it difficult to find suitable cover, a specialist insurance broker will usually be able to help. The British Insurance Brokers’ Association (BIBA) can put you in touch with a specialist broker.