This article attempts to explain the reasons why teenagers pay a higher premium for their car insurance; it is not a how-to guide on lowering your auto insurance bills if you are a teen or a young male under the age of twenty-five.

 

It is no secret that young people pay more for their auto insurance which is odd because it is this exact group of people that are the least likely to be able to afford to pay those types of bills. This often translates into anger towards insurance companies for discriminatory practices against young drivers.

Is this discriminatory? Is charging higher insurance rates for young and teenage drivers and categorizing them is a class that should pay higher discrimatory? The short answer is "no."

It would help to explain the reason that this group of drivers pay more. It is important to first explain one of the basic tenets of insurance. Insurance is based on the law of large numbers. What this means for insurance is that premiums are based on the characteristics of certain market segments. For example, based on historical statistical data, insurance companies find that drivers under the age of 25 will get into more accidents and make more claims, on the whole, than drivers over the age of 25. Thus, drivers under 25 pay more.

This group of drivers may have more accidents for any number of reasons such as inexperience or a higher propensity for recklessness. Either way, it doesn't matter. All that matters is that young drivers have more claims. And they do. That’s a fact.

Now, if young drivers have more claims, would you still believe that charging them higher insurance premiums is discriminatory? Maybe, maybe not. If not, then the higher rate of claims would have to be paid some other way. Perhaps, the higher premiums should be shared amongst all drivers? In that case, drivers above the age of 25 would be compensating young drivers for their claims through their own higher premiums. Now, that wouldn’t be fair, would it?

Some teenage drivers may say that they have never had an accident and, for that reason, should not pay as much as other young drivers do. This is faulty reasoning. Most teenage drivers actually haven't had a car accident. It's just that a higher percentage of them have. It is that higher percentage that makes it a higher probability that a young driver will have an accident. Your insurance rates are based on this probability for a future accident.

Teenagers and young drivers do pay a higher premium for insurance because they are a higher risk. No matter how much you think that this is unfair or discriminator it won't change. It won't change as long as other young drivers keep having accidents. So, your anger should be directed at reckless young drivers. Get them to behave while behind the wheel and your own insurance rates will drop as a result.