The number of teens getting driver’s licenses is much lower than previous generations. Analysts, however, tell us that young people actually like and want cars. I’m wondering if the cause of the trend is simpler than that: Young people can’t afford a car — any car, new or used — because of insurance premiums.
My daughter saved up and is ready to buy a car, a used Ford Escape. To get her own insurance, she’ll pay more than the cost of rent for her apartment.
Both my daughter and son had been piggybacking on their parents’ auto insurance until they moved to their own places. I asked my son what his young adult friends do, and he told me his friends still living with their parents are covered by their parents’ auto insurance. However, he has friends who live on their own, and he admitted he thinks they are likely driving without insurance.
In fact, only 64 percent of young adults have car insurance, according to Princeton Survey Research Associates International. That figure is likely less than the number of actual cars millennials own, some folks in the insurance industry suspect. As a whole, young people are the most underinsured in health and homeowners coverage, too. It makes sense: If I wasn’t paying for my son’s auto insurance, it would cost him more than he makes to insure any car, even if he was given one for free.
Industry averages show that when teens reach driving ages, a household’s auto insurance bill jumps. A 2013 study by InsuranceQuotes.com reported that insurance premiums for families adding a teen driver more than doubled in 10 states; Michigan’s rate averaged a 75 percent increase. Insurance costs go down slightly as the young drivers get into their 20s, but still are significantly high, likely unaffordable. Even with a budget used car, that can be several thousand dollars annually.
The prospect of insuring drivers in the U.S. is likely to change dramatically when autonomous cars begin to reduce accidents as experts are predicting. We all think that will be to our benefit, except for folks like Jason Fernandez, a personal injury lawyer in Silver Spring, Maryland.
Asked March 1 by Audie Cornish, an NPR news host, “How will liability work, in a world of self-driving cars?” Fernandez responded: “I’ll have to find a new job, and I’m OK with that. If someone now is involved in an accident with a driverless car and they sustain very minor injuries, the answer is probably [I would not take that case] because the cost of investigating such a claim would overwhelm the value of the case.”
In the meantime, the insurance industry is re-analyzing the way it calculates risk. Risk equals potential loss, which requires insurance companies to raise premiums to cover that potential loss. Connected cars — the first step toward driverless cars — create and record data such as speed, braking force and location which aids the process of risk analysis, and enables setting insurance premiums based on driving behavior.
Read more of the original article in The Detroit News.
