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Young driver: how do insurers set their prices?
Insurers are free to set car insurance prices, according to criteria associated with the usual driver of the vehicle in particular. Consequently, an extra premium is generally applied to young drivers. However, this may be reduced by certain price concessions.
What is the definition of a young driver?
"Young driver" status is not directly linked to the age of the licence holder. According to the French Insurance Regulations, a young driver (or "novice driver") is considered to be:
• someone who has held a licence for less than three years,
• or someone who has held a licence for three years but cannot prove that they have subscribed to car insurance in his or her own name during the last three years prior to taking out a new contract.
Impact of young driver status on insurance premiums
Statistics show that drivers who have recently obtained their licences — especially young people — cause more accidents than the average driver. In this way, 20% of fatal accidents in 2015 involved young drivers who had held their licence for less than two years. For insurers, this means more potential risks relating to young drivers and potentially more compensation to pay out.
Consequently, insurers generally apply an additional insurance premium (the "extra premium") to an insurance policy taken out by a policyholder with young driver status. This extra premium is governed by the French Insurance Regulations. At the most, it amounts to a 100% surcharge for the first year of insurance in relation to the reference price for an ordinary driver. It decreases over time provided that the young driver has not been liable for any accidents: the maximum surcharge drops to 50% in the second year and 25% in the third year. It disappears after three years without an at-fault accident.
The extra premium is applied before the bonus-malus clause: the bonus will therefore be higher for a careful young driver and the malus will also be higher for a careless one.
Insurers may adjust the extra premium. For example, a higher extra premium may apply to young drivers under 25 years old and another lower extra premium may apply to older novice drivers or to those who have held their licence for at least two years.
According to insurers, young driver status may also be associated with an increase in the excess payable in the event of an at-fault accident.
How can young drivers reduce their extra premiums?
The extra premiums for young drivers can be reduced if they have taken part in the "Early Driving Instruction" (AAC) scheme. The AAC is open to young people of at least 15 years old with the agreement of their legal representative and the insurer of the vehicle. The AAC takes place in two stages:
•firstly, an initial training course with a qualified driving instructor, consisting of at least 20 hours of driving lessons after passing the French Highway Code;
•secondly, practical driving experience under the supervision of an accompanying adult (who has held a car licence for at least five years uninterruptedly) for a period of at least one year and a minimum distance of 3,000 km, before taking the practical tests of the driving examination.
Insurers generally consider there to be a lower risk of accidents for young drivers who have followed the AAC scheme, and offer price concessions to encourage this type of training. Consequently, for the first year of insurance for a young driver who has followed the AAC scheme, the extra premium may be halved (the extra premium will amount to 50% instead of the maximum 100% of the standard rate). After the first year of insurance, the extra premium may be halved again if the policyholder has not been responsible for any accidents. It is cancelled altogether after two years.
Another way for young drivers to reduce their extra premiums is to follow the theoretical and practical driving course offered by certain insurers, which may or may not be free of charge. This course, focusing on prevention, is designed to help young drivers acquire the right instincts and improve their anticipation of risks encountered while driving. It also allows certain insurers to offer price concessions, such as a lower extra premium at the end of the first and second years of insurance for drivers who have attended the course.
Pacifica, the general insurance subsidiary of Crédit Agricole Assurances, offers two types of free ("Box Reflex’Conduite ") training courses to help young drivers acquire the right instincts:
•a one-day course at a driving circuit alternating between practical and theory exercises
•a one-hour coaching session at a driving school involving a skills audit, tailor-made advice and practical exercises
Sources: Fédération Française de l’Assurance - Observatoire National Interministériel de la Sécurité Routière