GlobalData Plc

Telematics should be mandatory for young drivers

Making telematics-based policies compulsory for younger drivers aged 17–21 has the ability to save lives through better driving, help policy holders save money on their premiums, and fast-track the uptake of telematics policies.

In a recent statement, telematic solutions provider Wunelli appealed to the UK government to make telematics policies obligatory for young drivers aged between 17 and 21. The firm’s proposal is that while young drivers must have a telematics policy, they will be exempt from insurance premium tax (IPT), which will lead to cheaper motor insurance premiums.

Making such policies mandatory for young drivers is primarily intended to promote safer driving. Younger drivers have the least experience, which puts them at the highest risk of claims. Considering that 14% of drivers killed in road traffic accidents in 2015 were aged between 17 and 24, telematics policies that encourage safer behavior behind the wheel would save hundreds of lives.

This in turn would save the government millions of pounds, which according to Wunelli’s calculations could substitute the income currently generated by imposing IPT on young drivers. So overall, by making telematics compulsory, lives will be saved. This would lead to government savings that could be passed on to young drivers by exempting them from IPT.

Younger drivers pay the highest motor insurance premiums and so uptake of telematics policies which give them access to more competitive premiums are already popular. Making telematics policies compulsory for the demographic may therefore not be met with high resistance. This would especially be the case if policy holders didn’t have to pay IPT, which has now risen to 10%.

It was thought that telematics would shift from an opt-in to an opt-out model before becoming obligatory. However, a market shift towards an opt-out model may be skipped entirely. If young drivers are required to have a policy, then over time legislation would likely extend to encompass all policy holders.

Young drivers are potentially a powerful force when it comes to telematics. If made compulsory across the demographic it is likely that even when policy holders fall out of the 17–21 age bracket, drivers will continue to use the technology that they have become accustomed to. It would also increase demand to implement the technology in UK cars. If the technology is already present in their vehicle, this has the potential to influence higher uptake among older drivers.

Greater uptake of telematics-based policies is beneficial in that it would encourage safer driving and save lives. With younger drivers being of the highest risk and paying the highest premiums, they therefore have the most to gain if this technology is made mandatory.

By Danielle Cripps, General Insurance Analyst

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