Insurers told high rates push young drivers into being uninsured
Insurers should lower premium rates for young drivers as part of the fight against uninsured driving, according to Edmund King of the RAC Foundation.Speaking at the ABI conference on uninsured driving, King called for insurers to be more creative in the way they deal with the younger market and look at ways of making pricing more inclusive.He said: "Young drivers feel they are all tarred with the same brush and it pushes them outside the law."You might not like it, but it needs to be addressed. We would like to see more incentives here rather than insurers trying to cream off the better parts of the market."Initiatives proposed by King included developing better testing of drivers to determine risk, and investigation of the possibility of cross subsidisation of younger drivers.King highlighted a study by the RAC that showed how motor insurance in some low-income areas can account for up to a quarter of the total household income.However the idea that insurers should price on social rather than economic criteria was rejected by both the ABI and insurers.ABI director general Mary Francis said: "It is absolutely right that insurers have the right to price according to risk."The idea of cross subsidisation was also rejected by First Alternative, a new joint venture between Direct Line founder Peter Wood and Halifax, that specialises in non-standard risk (see box).Chief executive Colin Batabyal said: "The younger driver thing is a difficult issue, but the prices we quote reflect the nature of the risk."
Cheaper motoring planFirst Alternative launched into the motor insurance market at the weekend promising to undercut the opposition by an average of £140.Through specialist underwriting and anti-fraud measures, First Alternative chief executive Colin Batabyal claimed the new company could significantly improve on the performance of other insurers.He said: "We are aiming to cut the cost of motor insurance for non-standard motorists, while at the same time providing them with a product that has the best benefits of any other on the market."First Alternative will be using a suite of fraud detection and protection measures to cut down on costs. These include voice stress analysis (lie dectectors), aerial location viewing systems to view claims sites and a range of specialist databases to sift policy applicants for potential fraud. First Alternative will be targeting an estimated 40% of the market including young drivers, drivers with convictions and those driving high performance cars.