Car Insurance Rates on the Rise – Younger Drivers Pay the Price

Auto insurance rates are definitely on the rise, and some of the drivers who are finding themselves hardest hit by these cost increases happen to be the youngest on the road. According to the web site, the average cost of insurance premiums has risen by roughly 40% within the past year. Drivers aged 17 to 22 saw an even more dramatic leap in rates. Many drivers in that age-range had their auto insurance premium increase by nearly 64%, but not necessarily for reasons most people might guess.

Teen driving safety is an issue of paramount importance, one which led Congress to declare the third week of every October National Teen Driver Safety Week back in 2007. For the fifth consecutive year, national insurance company State Farm has gone out of its way to promote greater public awareness of the ongoing need for greater teen driver safety, particularly because car collisions remain the leading cause of death among young drivers.

Having formed partnerships with the Children’s Hospital of Philadelphia, along with many law enforcement groups, State Farm has sunk nearly $20 million into research to determine how best to keep teenaged drivers safe.

“Teen car crashes affect all who share our roads,” Laurette Stiles, vice president of Strategic Resources at State Farm, said to “During National Teen Driver Safety Week, and year-round, we invite everyone to join the national conversation aimed at preventing unnecessary injuries and loss of life.”

Auto insurance coverage for drivers under the age of 25 is costlier, in general, because statistics have proven that drivers below that age are more likely to be involved in an accident. The vast majority of drivers will have the cost of their coverage drop after age 25. Many experience a reduction of their insurance costs even sooner. Once a driver has had a license for three consecutive years, she often qualifies for what is known as a “good driver discount,” provided that she has a clean driving record devoid of any violations or accidents.

Insurance providers typically defend their rate hikes with statistics, pointing out that premiums are higher for young drivers because they cause more serious accidents, as well as the likelihood that insurance claims will be filed.

However, reports that recent price inflation by insurance companies for the coverage for young drivers is due the struggles insurers have had with customer loyalty. They lose money when people hop from company to company, and have responded by jacking up their premiums for young drivers, regardless of their driving behavior, because fickle customers are “riskier” in a revenue sense.

Some experts have observed that the recent rate increases seem to be an attempt by certain insurers to deter young customers from purchasing coverage from them. In the past, insurance companies attempted to lure young customers with good premiums in the hopes of cultivating a loyal, long-term customer base.

Those experts go on to point out the flaw in the current trend of insurers raising their rates for young drivers—higher rates have a greater chance of provoking customers to look elsewhere for affordable auto insurance by shopping around. This causes the insurance companies to respond by raising rates, which makes customers look for coverage elsewhere. The result may be an endless spiral of increasing rates.

Because auto insurance coverage is something that is mandatory for all drivers, no matter what their age, young drivers have no choice but to pay the higher premiums charged by many insurance agencies, that is, if they wish to get behind the wheel.

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