Inflated car insurance premiums are deflating young drivers


He is certified to fly commercial passenger aircraft, but car insurance companies still consider him “high risk” simply because he is a young driver.

Robin Somers, 20, tried for weeks to find affordable car insurance for his 10-year-old car. His search was in vain.

Despite driving for four years with a spotless record, he faces more than $6,000 to $8,000 a year in insurance premiums, more than half of what it costs to drive. used car itself.

“Having to pay so much just because I’m young, and having no control over it despite having a good driving record, is equally sad and discouraging,” said Somers, a recent college graduate who works as a commercial airline pilot.

Young drivers under the age of 25 pay up to four to five times the amount of car insurance compared to more experienced drivers. For many already struggling with student debt and the ever-increasing cost of living, the price of car insurance is another obstacle to financial stability — and for some, it may even affect their job prospects.

As insurance premiums continue to climb, experts, novice drivers and their parents say it’s time to rein in sky-high prices.

“Rates have definitely continued to rise,” said Jessica Moorhouse, millennial money expert and certified financial advisor. “There should be more checks and balances because I feel like there’s a lot of smoke and mirrors and secrecy about how prices are calculated.”

Auto insurance premiums in Ontario are among the highest in the country. In 2020, average annual premiums in the province cost $1,655, according to the Insurance Bureau of Canada and the General Insurance Statistics Agency.

Still, prices vary widely, with some young drivers paying over $10,000 for auto insurance each year.

“It’s the experience factor,” said Matt Hands, director of insurance at ratehub.ca. “With insurance, the longer you drive and the cleaner your history, you’re going to see your rates improve, especially after you’re over 25.”

When Somers first bought car insurance as a student in Thunder Bay, he paid $3,500 to insure his first vehicle, a nearly 20-year-old car he bought for $800.

Since graduating and returning to town, the rates haven’t dropped, although Somers has a more complete driving record.

“Rates are astronomically high,” said Somers, who received insurance quotes over $11,000 for his 2012 Audi SUV. prices drop a bit after the first few years. But they haven’t diminished at all.

For Somers, it is necessary to have his own car to get to work at Billy Bishop Toronto City Airport. His shifts often start at 5 a.m., before the start of public transit service. He is also unable to share his mother’s car and be added as a secondary driver – which would lower insurance premiums – since she also works full-time as a nurse.

But he and his mother, Sue, tried almost everything else: shopping around, bundling their two insurance policies, even trying to get a reduced rate through the Ontario Nurses Association.

The cheapest quote they received was $6,621 per year.

“It’s almost necessary to have a car (to get a job), so putting the financial burden of that amount of money on a young adult of that age, when we’re just starting our careers or even still school, is really tough,” Somers said.

“At a time when housing and the cost of living are also astronomical, it feels like we’re being discriminated against just for being young.”

Sue, a single mother who also has a 17-year-old daughter about to receive her G2 licence, said premium prices have forced her to take out a mortgage on her house. She will have to provide for her son’s needs until he is around 25 years old. Somers will repay his mother after completing her aviation training.

“My heart goes out to young people,” Sue Somers said. “I’m really concerned how they’re going to cope with such high expenses at such a young age.”

Although insurance premiums have actually fallen slightly over the past year, down 0.7% year-over-year in June according to Statistics Canada, they have increased over the past two years in due to inflation and increased auto theft in the GTA, Mains said.

Insurance companies calculate premiums based on historical data. Young drivers are more likely to be involved in an accident than more experienced ones, hence the higher rates. While only 13% of licensed drivers were between the ages of 16 and 24, they account for 24% of fatalities and 26% of serious injuries, according to a 2004 Transport Canada report.

Statistics also show that men are more likely to be involved in automobile accidents than women. In the United States, 71% of all motor vehicle accident deaths were male in 2018, according to the Department of Transportation.

According to data from ratehub.ca, 17-year-old male drivers pay about $2,000 more in insurance than women of the same age. Those premium differentials start to narrow as drivers become more experienced, Hands said.

Kelsey Hawke, RATESDOTCA expert and licensed insurance broker, said bundling home and car insurance policies could bring prices down. It also recommends that young drivers take out an insurance policy as soon as they obtain their licence.

“Gaining insurance experience will help lower their premiums year over year,” she said.

Hands added, young drivers should complete their graduated license program and obtain their full G license as soon as possible to reduce insurance costs. “You show your supplier that you are going through the various stages quickly and you prove that you deserve to have a license and that you are a quality driver,” he said.

Hands also pointed to telematics insurance programs, which track users’ driving behaviors in real time. These programs could save drivers up to 15 to 20 percent a year if they adopt good habits, Hands said.

But given the price of car insurance today, as well as fuel and car maintenance costs, Moorhouse said it might be cheaper for some young drivers to rent a car or use a car-sharing program, depending on how often they drive.

In addition to student loans, rent and other living expenses, “trying to find six to eight thousand other people to pay just for insurance, not including car and gas, might be like a thing they don’t. can’t handle,” she said.

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