Insurance companies feel sting of fewer teen drivers
Insurers could see less revenue as more parents delay their teenagers' driving. But if accidents are also down, it could mean more profits, too.
So many parents are keeping their kids away from the wheel, in fact, that Nationwide Mutual Insurance is warning that it may see its premium revenue fall as a result. A Nationwide survey found that almost a third of parents were concerned about the added costs of allowing a teen to drive. One in seven parents said they would hold off allowing their children to drive.
How expensive is it? Nationwide says households shell out an extra $3,100 each year to allow teens to drive. Gas prices are soaring, and everything else seems to be getting more expensive as well.
Auto insurance for a teenager is through the roof. One industry trade group said adding a teen to an insurance policy can increase premiums by as much as 100%, Bloomberg reported. About a third of the parents who do allow their teens to drive have cut back on dining, entertainment and other expenses just to pay the added costs, Nationwide says.
So insurance companies may see revenue drop as families delay teen driving. But those companies are already seeing less money from overall personal auto premiums, Bloomberg reported. Auto-premium revenue has dropped in the past five years for Berkshire Hathaway's (BRK.B) Geico and insurer Chubb Corp. (CB).
One Nationwide executive looked at the bright side, telling Bloomberg that there would be fewer car accidents as a result, which means that profitability would rise.
Nationwide says its teen-driver policies have dropped nearly 7% since 2008. Only about 5.4% of its 4 million auto policies are for teens now.
That seems in line with data from the Federal Highway Administration, which found that the number of 16-year-olds licensed to drive dropped to 31% in 2009 from 37% a decade earlier, Bloomberg reported.
We own a towing company, and yes, we clean up quite a few accidents with teen drivers. But we also clean up lots of adults' cars that have been wrecked as well. I can't say that one group holds sole ownership of stupid or careless driving. Some 16 year olds ARE mature enough to drive, just like there will always be that group of 40-somethings that AREN'T.
It all boils down to parenting--each parent has to decide for each child whether or not they're capable. Not the government, not the insurance companies, but the parents.
With that being said, go ahead and ask people if they give a damn whether or not every single insurance company goes bankrupt tomorrow. As far as I'm concerned, they can suffer a slow and unimaginably painful death.
I added my 16 year old son to my auto policy and it essentially doubled. The cost of him driving an 11 year old car is as much as my husband driving a 5 year old truck and me driving a year old 4 door sedan. Granted, I have a lot more insurance than the minimum required, as well as an umbrella policy but I am suppose to be getting multi car and policy discounts. Even with a good student discount and an additional 5% savings for his completion of 2 hour training at the agent's office, it is still over $100 a month extra. He has been driving for 2 years now (NO TICKETS AND NO ACCIDENTS) and the premium keeps going up even though his experience has increased and the value of the car has decreased. Personally, I think insurers should do more to incentivize young drivers to stay accident and ticket free, like give them a $100 rebate or refund if they remain ticket or accident free upon renewal. They are sure not giving it back to the parents in rate decreases.
One factor the article failed to mention is the demographics of that age group. I know that the number of children in that age group is significantly less than those a few years older. In some school districts enrollment is down 20% from prior years. The declining enrollment is directly related to a lower birth rate 16+ years ago. So I don't think it is all based on the economy. Somehow parents find a way to pay for it.
Insurance companies are all about profits. While I agree that every business should be able to earn a profit, insurance companies have gotten too greedy and have been allowed to cherry pick who they will provide coverage for - or not - and at what price.
When it comes to paying out for legitimate claims, they dig in their heels, generally pay less than market value and charge extra for continuing your coverage. And age discrimination doesn't just apply to young drivers. My father is 76, has an excellent driving record and only uses his vehicle for pleasure. He wouldn't dream of being on the road in bad weather, either. However, he is finding that if he wants insurance coverage, his premiums are rising with his age and/or insurance companies are flat out refusing coverage because of his age.
With the price of cars, gas and insurance, driving is becoming more of a luxury, although for some it remains a necessity. And the insurance companies have the gall to whine about lower profits?
I have to disagree with the stereotype that 16 year olds aren't mature enough to drive. I drop off and pick up mu 15 year old daughter from high school every day. Almost every day, I witness a near accident, incredibly rude behavior and a complete lack of respect for basic road rules and courtesy. Not once has it been a teenaged driver who was the offender. It's always an adult, 99% of the time a woman on the phone with a soccer/cheerleading/dance/or gymnastics sticker on the rear window. (Just an observation)
I am a stay at home Mom, so don't get all grumpy with me. Seriously, my peers are HORRIBLE drivers. It astounds me. The kids may not be experienced, but they've more recently studied the subject and are quite frankly, better trained than their parents. My daughter is currently in driver's training and I'll decide about her getting her license later on when she's had some time behind the wheel.
I think everybody should have to retest every 10 years or so, and retake drivers ed/training if they don't pass.
As far as insurance....RIDICULOUS!!! We have increased from $98 to over $200! It is insane, but my son is working and I am making him pay half of the additional cost (to offset it and to teach him responsibility).
the ins. comp.'s have brought this on themselves--they wait for kids to hit 16 so mom & dad can start shelling out the big bucks ! not so true anymore . i'v owned a bodyshop for yrs. in a small town, and the amount of 16 to 18 yr old kids driving has been cut in half . mom & dad can't afford the ins. rates, and with gas prices at where they have been for three yrs. "cruising" is out of the question !! this has also increased the amount of public transportation that is available---the other problem is upkeep for a vehicle (outrageous) is putting it mildly ! we as adults can't take the kids out ,and show them how to do their own maint. . cuz as we open the hood it leaves us breathless, plus in my kneck of the woods-- everyone has to have a 4x4 (16 & 4x4) all i can say is WOW !!
other problems come into focus when ins.co. look at "MIP's" -- now were talken biiiiiiiiiiiiig bucks !!
just my opinion.....steven
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