Why Teens Pay Higher Premiums

I've been driving for two years and I have a perfectly clean record. Why is it that my insurance is still so expensive?

If you are a teenager having to fend for your own vehicle and the expenses surrounding it like insurance, or you’re a parent of a teen who has recently had the honor (horror?) of adding them to your car insurance policy, you know that the rates for insuring teenagers is sky high. Why is that and is there a legitimate, legal reason for it? More importantly, is there anything that can be done about it?

Basic Principles of Auto Insurance

Auto insurance, like all other insurance out there, is a matter of risk management. The insurance company is interested in making a profit on all of the policies it writes, and at the same time, it recognizes that it will have regular losses (people will cause accidents and the insurance company will have to pay medical expenses and repairs). This requires that a successful insurance company run a very fine line balancing act between the cost of insurance premiums for their customers, their bottom line profit margin and making sure that they are collecting enough from all of their customers to pay for the occasional accident that happens among them. All of this balancing is done by underwriters – specialists who are trained in analyzing the risks posed by writing any policy. The higher the risk, the more of a premium must be charged in order to mitigate that risk. If a risk is too extreme, an insurance company may well refuse to write a policy at all.

So Why Are Teens So Expensive?

Put simply, the culprit for the cost of insuring teens is statistics. Statistically teenagers are much more likely not only to be involved in auto accidents, but to be the cause of those accidents. If that weren’t bad enough, teen drivers cause some of the most spectacular wrecks on America’s highways due to their actions such as driving distracted or driving while impaired (intoxicated). It boils down to wisdom and experience, which teen drivers have precious little of. According to recent statistics, a 17 year-old driver is more than five times as likely to get involved in a major automobile accident as an otherwise comparable 35 year-old. Lifestyle also plays an important part in this consideration. Which of the two is more likely to be out drinking and enjoying a party with friends on a Friday or Saturday night? Which of the two is more likely to be in a hurry to get from point A to B and speed as a result?

Teenagers may well think this is all terribly unfair. After all, they feel safe and know the rules of the road, they passed the tests for driver’s education, why should they be penalized like this when they haven’t done anything wrong? Well, feeling invincible (as pretty much all teens do), is also part of the problem.