Young drivers getting behind the wheel of a car does not just make their parents sweat, it gets insurers hot under the collar, too.
The almost three million drivers under 25 on UK roads are paying an average of nearly £2,000 in insurance each year, according to the Association Of British Insurers (ABI). This is a far higher price than they may ever have to cough up in the rest of their driving lives. But do all young motorists deserve to be tarred by the boy-racer brush?
Some in the insurance industry believe the one-policy-fits-all approach is unfair on the majority and does little to encourage safer driving.
This month is the second anniversary of The Co-operative's Young Driver insurance scheme which uses data from a car's "black box" to offer the incentive of lower premium costs to moderate driving behaviour. "This product treats the drivers as individuals and lets them prove they are safe behind the wheel and rewards them for it," says Amy Kilmartin, the project manager of the scheme.
The Co-operative was the first mainstream insurer to launch a black-box product and created the scheme as it wanted to help young drivers with their insurance costs, as well as address the high accident rates among the age group.
Data from the box is sent to the insurer and the driver through an "online dashboard" and a scoring system is applied to the driving style. "We assess driving performance based on four criteria," says Ms Kilmartin. "Speed, braking and acceleration, cornering and the time of day the driving is taking place."
Driving performance is assessed every quarter and young drivers receive an immediate reduction on their monthly premium – or cash back if they have paid in full – if they are judged to have been safe behind the wheel.
Zoë Freeborn, 19, from Reading, has been using the Co-op's scheme since its launch two years ago. Despite initially finding the black box "like a spy in the car", she quickly got used to it and found the arrangement appealed to her competitive side.
"People think that young people are competitive behind the wheel, and I am," she admits. "But, I compete with myself to be safer. When I see the data on my driving I want to perform better each time."
She is about to renew her insurance for the second time. Her premium has fallen from almost £900 two years ago, to a renewal price of £400.
"Having the box means you don't think twice about being a safe driver; you quickly get into the rhythm," she says.
In return for having a box fitted, the policy comes with an initial saving of 25 per cent, compared to traditional insurance, with an average premium of £1,345. Drivers can then earn a further 20 per cent discount through the year if they score well in each quarter, with an average renewal price of around £800.
Since its launch, more than 30,000 young drivers have signed up to the scheme and the Co-op claims it has given around £188 to the average driver in cash-back over that period. Its data also shows accident rates are a fifth lower compared with young customers on its standard insurance, with incidents being less serious and the cost of claims halved.
Research from the British Insurance Brokers' Association says sales of black-box motor insurance products increased five-fold between 2010 and 2012 and predicts there could be 500,000 policyholders by next year.
Ingenie has been offering its version for more than a year and estimates it will sign up another 25-30,000 young drivers this year.
The company was founded by Richard Lloyd, who said: "We approached this from a technology-first perspective, developing the box and then becoming an insurer."
The product also offers discounts, as well as reductions of up to 10 per cent over the duration of the policy for good-driving behaviour and favourable renewal rates.
Mr Lloyd says 70 per cent of its drivers have received a good-driving discount.
So is a black box in every young driver's car the answer?
The ABI thinks not. It is campaigning for more radical changes to improve safety, including: a minimum one-year learning period for young drivers; limiting the number of passengers; a curfew on night driving and zero tolerance on alcohol. Changes it believes will reduce insurance costs by up to 20 per cent.
In response, the Government has launched a consultation to overhaul young-driver rules in a bid to improve safety and cut insurance costs.
- More about: