Car insurance premiums jump 50% for young drivers

Young drivers are being hit hard by soaring car insurance costs, with new data showing the average price of premiums for under-25s has jumped by almost 50% in the past year.

Premiums have rocketed from £1,365 to £2,009 in the 12 months to January 2024, according to new research by Compare the Market. This means the total annual cost of running a car is now more than £3,000. 

So what's behind the eye-watering price hikes, and is there anything young drivers can do to reduce the costs? Which? takes a closer look at the issue to find out.

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How much are young drivers paying for insurance?

The cost of car insurance for young drivers has shot up by £644 on average in the past year, the Young Drivers report from Compare the Market has found. The comparison site revealed that, as a result of this rise, the total annual cost of running a car is now £3,043 on average for a young driver. Other expenses include fuel (£799), road tax (£180), and MOT (£55). This is a 25% increase from last year, when the average running cost was £2,436. 

The costs are even higher for young motorists who only have a licence to drive an automatic. Premiums for these drivers have surged to £2,803 on average – a £916 increase year on year. They now typically pay £760 more for annual insurance, compared to motorists with licences to drive both manual and automatic cars.

Figures from the Driver and Vehicle Licencing Agency (DVLA) show a 300% increase in the number of people with an automatic-only licence over the past decade. In 2022-23, there were 138,354 people with an automatic-only licence in 2022-23, compared to 34,749 people in 2012-13. 

The Compare the Market report suggests this may be due to the rise in popularity of electric vehicles, as some car manufacturers are set to stop producing new manual car models.

• Find out more: best car insurance companies

Why are premiums higher for the under-25s?

Sadly, when it comes to the cost of car insurance, age and experience matters. Drivers who haven't been on the road for long are considered more likely to be involved in a car accident, so providers up their premiums to account for that increased risk.  

For example, government figures show that, in 2022, around a fifth of all those killed or seriously injured from collisions in cars involved a young driver. Young male car drivers aged 17-24 are four times as likely to be killed or seriously injured compared with all car drivers aged 25 or over. 

Premium hikes could force young drivers off the road

A separate Compare the Market survey revealed that more than three in 10 drivers found it difficult to cover the cost of driving, while nearly eight in 10 drivers are worried about the cost of their car insurance policy. More than four in 10 drivers expect to have to take on additional debt, such as a loan or credit card borrowing, to keep driving.

Julie Daniels, motor insurance expert at Compare the Market, worries that the surge in premiums will mean car insurance becomes 'prohibitively expensive'.

Of course, young drivers are not alone in feeling the squeeze from record price rises. Figures from the Association of British Insurers (ABI) show the average premium was 25% more expensive in 2023, compared to 2022. While technological advances in newer vehicles have helped push up the cost of repairs and replacements, inflation is the main reason why premiums have gone up over the past year. 

There is hope, however, that the ABI's new 10-step 'roadmap' will help combat the rising costs of cover. The plan, unveiled last week, includes providing information to help consumers make more informed decisions about which vehicles are more costly to insure, combating vehicle theft, and campaigning to reduce insurance premium tax, which currently adds £67 to the average insurance policy.

Cost-cutting tips for young drivers

Motorists aged under 25 can reduce the cost of car insurance in several ways:

• Shop around: Even though there are few competitive prices out there, you should always look to see what other deals are available before you commit to renewing or buying a new policy. Use price comparison sites to help, but remember not all providers are on there. Which? Recommended Providers Direct Line and NFU Mutual are examples of this.
• Black box insurance: Also known as telematics, this type of cover uses technology to track your car and calculate how safe a driver you are. The insurer uses data on factors such as braking, steering, speed and mileage to decide whether to reward you for your driving skills. Benefits can include money off your premium and bonuses such as retail vouchers. 
• Add a named driver: Adding an older, more experienced driver to your policy can sometimes reduce your annual premium. But be warned: it's illegal to put someone down as the main driver if this is not the case and can lead to an insurer refusing to pay a claim, cancelling the policy altogether or even taking legal action against you for fraud. 
• Keep mileage down: Lower mileage equals lower risk to insurers and therefore cheaper cover, so try to limit the miles you clock up over the year if you can.
• Pay annually rather than monthly: Choosing an annual policy could save you hundreds of pounds. Insurers tend to charge monthly payers interest, which means the policy will be more expensive overall compared to paying upfront.
• Haggle for a better price: You might be able to get the price down by haggling. Do your research first and come to the negotiation table armed with any cheaper quotes for the same level of coverage. You may find they are happy to give you a discount rather than lose a customer to a rival company.

For more tips, visit out guide on how to find cheap car insurance.

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