Car Insurance: Young People

Jo Churchill Excerpts

Monday 20th March 2017 Westminster Hall

[Steve Double]

Later in my speech, I will talk about telematics and some of the available technology. My response to my hon. Friend is that I think we need both. Yes, we need to embrace technology and use it as much as possible to help people to be safe on the roads, but I am also of the view that we can do better with the current testing regime in helping people at that very initial stage to be safer on the roads.

[Jo Churchill (Bury St Edmunds) (Con)]

Does my hon. Friend agree that the 21st-century driving conditions that my four children, his children and all the young people in our rural constituencies face on the roads mean that we need a different approach? Lessons on night-time driving and motorway driving are not obligatory. Many countries, including New Zealand, Australia and France, run a probationary period, for example, which is something that could be looked at and learned from.

[Steve Double]

My hon. Friend makes a very good point that I will come to later. I think the current testing regime needs to be more robust and more comprehensive to address the many different aspects of driving, rather than just having the very narrow test we have currently. We teach young people to pass the test. We do not equip them to deal them with the many different experiences of driving on roads in the UK today.

--- Later in debate ---

[Steve Double]

The hon. Gentleman makes a very good point. There are many pitfalls to the issue of fronting. The insurance industry should do more to address that issue at the beginning, rather than wait until there is a claim. Companies happily take the premiums before they address the problem. There is more that can be done to ensure that, when older drivers are put on policies, it is proper and legitimate.

Some insurers now offer telematics policies and fit a GPS-enabled transmitter to the car; I believe that smartphone app options are also available. Drivers under 21 who take out such a policy and have the appropriate equipment fitted are typically offered a 25% discount on the initial premiums. Such policies can also further reduce renewal premiums, as there is a record of where, when and how the car has been driven. High-risk driving behaviours are recorded by the technology and can cause renewal premiums to rise, whereas sensible driving can lead to a significant reduction in premiums.

One insurer, Marmalade, which operates a telematic policy, saw a dramatic improvement in the accident rates of novice drivers. On average, one in five new drivers makes a claim in the first six months, but with monitoring equipment in place, that number improved to one in 16—an outstanding and significant improvement. Telematics policies have been growing in number. In 2009, there were about 12,000, but the technology has become more widely known and continues to fall in price, making the policies more attractive: the number has risen quickly to more than 750,000 today.

Dash-cam technology can also be used to improve driving and can lead to a fall in the insurance price. Some insurers now offer lower costs—typically 10% lower —provided that a camera is fitted and is always activated when driving. That footage is made available should there be a claim. That irrefutable evidence can be very helpful, given that young drivers are sometimes blamed and bullied at the roadside for collisions that are not actually their fault, and there is often a presumption that the less experienced driver is at fault. Dash cams also have the effect of improving driving behaviour, as the driver knows there is a record of how the car has been driven.

Some households enter into a written agreement with the novice driver, in which behaviours such as careful, legal and considerate use of the car are set out. Both parties sign the agreement, which, although not legally binding, offers a clearly set out explanation and brings focus, consideration and thought to the very real responsibilities of driving safely. An example template can be found on the website brake.org.

As helpful and welcome as many of those things are, they fail to address the underlying issue. It is time for us to look at our system for obtaining a licence to drive. It is my view that in this country we teach people to pass the test, rather than educate and train them to become safe and competent drivers. Rhys Parker, the instigator of this petition, said to members of the Petitions Committee:

“if young people are so dangerous that the only way to get them to drive safely is forcing them to pay £200 for an advanced driving test, why don’t we just make the driving test better?”

I agree. I think he has a point.

The driving licence was first introduced in 1903, but there was no test requirement. The test was introduced in 1935, and although there have been some changes along the way, such as the introduction of the theory test in the mid-’90s, little has changed. In that time, vehicle technology has changed, cars have become much faster and we have gone from fewer than 1 million cars on our roads to more than 30 million.

The driving scene in our country has changed completely. I believe we need a better, more rigorous and comprehensive system of training and testing that is fit for our age and our roads. I suggest that passing the driving test should be seen not as a one-off, but as a process. Under what has become known as a graduated driving test, new drivers would have restrictions placed on their driving. For example, they would not be able to drive at night or on motorways, or carry more than one passenger, until they received further tuition, gained more experience and further proved their ability to drive.

[Jo Churchill]

I thank my hon. Friend for the powerful points he is making. Will he consider the fact that some young people in our isolated rural areas need that access? Headway, a brain injury charity, spoke to me about the problem it has with carers. For a young person paid the minimum wage, a huge premium is a tough barrier that can prevent them from following a career they wish to pursue.

[Steve Double]

My hon. Friend makes a good point; she represents a rural area similar to mine. As I said at the beginning, that can be a real issue. For a young person in a rural area who needs a car to get to work, get a job or access further education, the cost of insurance can be a real issue. My two young sons passed their test quite young, and we had to work with them to find the money for the insurance. It is a real issue, and we need to tackle it at source by looking at the risk, rather than artificially managing it.

--- Later in debate ---

[Richard Burden (Birmingham, Northfield) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Roger. I add my congratulations to the hon. Member for St Austell and Newquay (Steve Double), and I congratulate the Petitions Committee and the Transport Committee on their work in bringing the debate. I also congratulate all hon. Members on the contributions they have made.

The petition that gave rise to the debate raises so many important issues about the astronomical prices of car insurance premiums for 18 to 25-year-olds. Those premiums have been shooting up while wages have often stagnated for people in that age group and their overall cost of living has increased—a point made ably by the hon. Member for St Albans (Mrs Main).

The debate also takes place against a background of changes in the way many young people look at questions of their own personal mobility. The hon. Member for St Austell and Newquay mentioned driving being a “rite of passage”; I am not so sure that that is the case for all young people these days. Driving is one of a range of different options that they see for getting about, and looking at things in that way is not necessarily a bad thing; there are some journeys for which the use of a car is not the most appropriate. I guess that hefty insurance premiums are at least one of the factors that has encouraged some of those changes of attitude. That said, I am certainly not arguing that there is nothing to worry about.

As many hon. Members have said, the different options on how to get about are not equal everywhere; they are greater in urban areas than in rural ones. For many young people, access to a car is not only about the ability to have a social life—it can make the difference as to whether they can get to college or to a job. Indeed, if we look at the data map for this petition, we see that many of the 180,000 signatories were from outside major cities, with a particular concentration, interestingly, in the north-west of England. No doubt many of the signatories to the petition feel that they cannot overcome the huge barrier of big insurance premiums that prevents them from accessing a social life, employment and education.

The idea that it is easy to get about without a car in towns is sometimes overstated. It is often thought to be easiest in London. In many ways, that is true; many of us look with great envy at the state of public transport in the city. The way that buses are regulated and operate in London is something many of us aspire to. Who knows—if the Bus Services Bill finds its way through the House without amendment, we may get nearer to that situation. However, when the Petitions Committee and Transport Committee took oral evidence on this petition, they heard that many young people—even in London—feel they have to rely on cars to get to work. Some 22% of 17 to 34-year-olds travel to work in London by car and feel they need to do so.

It is right that we address this issue. The Petitions Committee and the Transport Committee heard some really interesting evidence from a whole range of quarters about the different ways in which it can be addressed. For example, the Wheels 2 Work scheme showed some really imaginative thinking about how young people’s personal mobility can be increased, often by the use of two-wheel transport—not simply bicycles, but electric bikes, motorcycles and scooters—as well as four-wheel transport. It is doing some imaginative work on that, to provide young people with access to that kind of mobility.

[Jo Churchill]

Although I agree with the hon. Gentleman and congratulate Wheels 2 Work on its excellent work, that project is quite sparse and gives wheels for only six months. One in six people say they need a car for an apprenticeship, which often lasts for two years, so the two things do not marry up. Although the project is good, it is not overly practical, particularly in rural areas.

[Richard Burden]

The hon. Lady is right. Indeed, one of the points that Wheels 2 Work made when it gave evidence was that if the project is going to make a major difference, it needs a lot more backing so that it can both offer longevity of access to transport and reach different corners of the country. I simply raised it to say that such schemes are part of the picture and are things we need to think about.

The issue of prohibitively high insurance premiums for cars remains. A number of hon. Members today made important points about how, whether or not a cap on insurance premiums is the right way to go—the majority who mentioned it came out against—there is a need, at the very least, for greater transparency in the insurance industry about the way premiums are put together, the calculations that lead to different kinds of premium across different classes of driver and the impact of insurance premium taxes. We need that greater transparency at a policy level, but perhaps insurance companies and brokers should also think about it at the individual level, so that individual car owners and drivers can find out why a premium shot up from one year to the next and what increased risk was identified at that time.

Be that as it may, the insurance industry will still come back to the point—it has come up several times today, and rightly so—that, statistically, young drivers are much more likely to be involved in road incidents than those over the age of 25. As we know, the statistics are particularly stark among young men. There is, in truth, no silver bullet to tackle that issue. It needs to be tackled on a whole range of fronts and looked at in a rounded-out way. That is why many of us have felt for some time that there needs to be a proper Green Paper on young drivers and their safety, looking at the options for the future.

If we go back to March 2013, the headline of a Department for Transport press release stated:

“Government to overhaul young driver rules in bid to improve safety and cut insurance costs: Green paper on improving the safety and reducing risks to young drivers launched.”

Four years later, we are still waiting to see that Green Paper to explore the options for improving the safety of newly qualified drivers. We have never seen the result of that launch. At the end of that year, pursuant to a question I asked, the then Secretary of State for Transport explained that his Department was still

“wrestling with how to make things safer while not unduly restricting the freedom of our young people…We are finding this a difficult balance, with passionate voices on both sides. We will issue a paper when we have considered this further.”—[Official Report, 18 December 2013; Vol. 572, c. 629W.]

Four years on, despite calls from road safety campaigners and the insurance industry, the Government appear to have stopped considering the issue, and there is still no sign of that Green Paper on young drivers. If the Government really wish to do something about this critical concern, one of the core issues with the cost of car insurance for 18 to 25-year-olds, I ask the Minister again: is there going to be a Green Paper on the safety of young drivers? If so, when can we expect to see it? If not, why not? It seems an obvious thing that the Government should be doing.

What kind of thing could the Green Paper address? Telematics or in-car black boxes have come up several times in the debate. They can enable insurers to assess real-time data on an individual’s driving behaviour and charge more accurate risk-based premiums. As we have heard, in some cases new drivers can see their premiums fall by a fifth or more as a result of telematics. Anything that can enable responsible young drivers to be charged fairer prices for their insurance and bring down the number of road incidents has to be a good thing.

Black boxes are not, of course, necessarily a cost-free option. Nick Moger, the founder and chairman of Marmalade, a car insurance company specifically targeting young and learner drivers, explained in his written evidence to the joint Petitions and Transport Committee inquiry that black boxes are currently subject to VAT, which pushes up costs for insurers and young drivers. The question must arise of whether it is appropriate to remove VAT on technology that can prevent or at least reduce road incidents and save lives.

[Mr Peter Bone in the Chair]

The other issue that comes up is of course that telematics can often be fitted most reliably to new cars—cars that young people are often unable to afford, unless, as the hon. Member for St Albans said, they have access to a well capitalised bank of mum and dad. Telematics as a solution, or at least as a contribution to a solution, to reduce insurance premiums is not necessarily one that is available equally to all new young drivers, so it could be part of the package but not the whole package.

This week, the Vehicle Technology and Aviation Bill is in Committee; it had its Second Reading a couple of weeks ago. A number of us are serving on the Committee and looking at the Bill. The Bill itself looks at other things that could have a major impact by, we hope, reducing the number of young people involved in incidents on our roads, making our roads safer and perhaps reducing the cost of premiums. The Bill looks at how the insurance treatment of automated vehicles could change in the future. We already know that the use of technology to assist drivers can have a big impact in promoting road safety and reducing the risk of incidents. I am thinking of things such as autonomous emergency braking and so on. However, we are now looking to a future that not only involves those driver assistance mechanisms, but in which the ability to be in a car and travel from A to B may not depend even on having a driving licence in the form that we know it. The car itself—the vehicle itself—could be doing the driving for some or all of the journey. That has huge potential to improve safety, but again it is really important that the insurance consequences are got right. The Bill looks at how that can be done, and it is hoped that, if the Bill gets it right, that could contribute to falling insurance premiums as safety increases through automated vehicles. If we get it wrong, it could be another way of insurance premiums rising.

There are other things that a Green Paper could address if the Government produced one. The question of graduated licensing has come up again today. That involves looking at how and when new drivers or young new drivers can drive, having passed their test. There could be restrictions on the times of day when they could do so or on the number of passengers they could have in the car with them. It is not an easy question, and there are real concerns about what it could lead to, such as unreasonable curfews on young drivers. What if a graduated licensing scheme leads to a young driver being forbidden to travel at night and they work in a bar in a rural area? The wrong sort of graduated licensing scheme could restrict opportunities and be quite unfair.