Car insurance: does your age really increase your risk?

Benjamin Franklin famously wrote: ‘In this world nothing can be said to be certain – except death and taxes.’ These days, you could probably add insurance to that list. Home, car, life, health, travel, pet, income, business – you name it and the chances are you can, and are often obliged to, insure it. (And then pay insurance premium tax on top, in many cases.)

If you don’t keep an eye on the costs of these various policies, they eat up much more of your income than they really should. And it really is a case of buyer beware, as our investigation into the cost of car insurance shows.

When we pored over the insurance industry’s own claims and premium data, it revealed that many older drivers seem to be paying more than the claims records suggest they should – which is in nobody’s interest but the insurers’.

Dave’s car insurance premium hike

Take Which? member Dave Clegg who, when renewing his car insurance with Tesco Bank, faced an enormous hike of 173% to his premium after he turned 78. That’s £1,038 versus the previous year’s £380).

Dave said Tesco Bank wouldn’t tell him the reason for the increase, but he is adamant that nothing had changed except his age. Tesco Bank denied that Dave’s age was the reason behind the substantial premium increase, but refused to give a specific reason for why it had increased.

Age and car insurance

We examined data for drivers aged 18 to 85 (see the full details in the October issue of Which? magazine). On average, for drivers aged 51 to 85, there’s a bigger difference between the premium they pay and their average claims cost per policy than for those aged between 18 and 50.

For example, a 66 to 70-year-old paid an average premium of £279, 76.6% more than the average cost of a claim per policy (£158). For someone aged 21 to 25, the average premium (£964) was only 42.4% more than their claims cost per policy (£677).

Insurers are entitled to charge higher premiums for certain age groups, where this reflects a greater risk. But they need to demonstrate that this is reasonable and justifiable.

We challenged the Association of British Insurers with our findings. It said age isn’t the only factor determining a person’s premium, adding that insurers also take into account their claims history, address, driving experience and vehicle type. It also said there is a time delay between a claim being made and the change in premium reflecting that claim. We believe this goes only some way towards explaining these differences.

Switch insurance provider

The only way to make sure you don’t get ripped off is to benchmark insurance costs every year and switch as necessary. In the past two months, I’ve switched my home cover (£100 saving) and renegotiated my car insurance with the same provider (£150 saving, after it agreed to stop overcharging me and match the ‘new customer’ quote I had sourced on its own website). Neither took me more than half an hour.

You’ll be glad of insurance when you need to call on it, of course. But in the meantime, don’t leave your money on the table for insurers to snaffle up with next year’s uncontested renewal quote.