Data analyst and IF volunteer, Dan Johnson, investigates the barriers to car ownership amongst the young and how this is stifling opportunity and mobility.
Sky-high car insurance
After some very tough years for drivers, car insurance prices are finally coming down. According to the Association of British Insurers (ABI), motor insurance premiums in Q3 2025 – £551 per year on average – were £56 lower than the same period in 2024. 1
But car insurance is still 18% more costly than it was this time 5 years ago.1 And young drivers pay much, much more. Earlier this year, Confused.com found the average quoted insurance premium for 18 year-olds was £2,434. Even this is less than in 2023 − the all-time peak for UK car insurance premiums.
This is a huge financial barrier to young people being able to drive independently. So what’s going on, and why do young drivers pay so much?
What is going on?
The simple answer is that young drivers pay more because they cause more accidents. In other words, they cost more for insurers, so they pay more. It makes sense that the cost of car insurance decreases as drivers prove their competency after years on the road.
However, this does not explain the full story. In recent years, younger drivers have become a lot safer, with a 47% reduction in accidents from 2002 to 2016. In fact, they’ve been getting safer more quickly than other drivers (see chart). Despite this, young people have not seen a corresponding decline in the cost of their car insurance. In fact, their rates have actually gone up.
Partly, this is a product of prices increasing across the board. But these price rises are felt most acutely by young drivers as they spend more on insurance to begin with. In other words, a 50% increase from £2000 to £3000 is much harder to stomach than a 50% increase from £600 to £900.
But even when we account for this, young drivers have been uniquely hit by recent spikes in insurance costs. The spread between what younger drivers are quoted and what everybody else is quoted has increased. The ratio between 18 year-olds and 69 years-olds’s premium quotes was 4.4x in 2019, but jumped to 5.8x in 2023.3
Young people are right to feel aggrieved at this apparent unfairness. Many young people cannot afford to take this hit, especially at a time when their budgets are already being squeezed by higher taxes, student debt, and extortionate rents.
Priced out of driving
There are other barriers too – the cost of driving lessons, the cost and long wait time for tests (22.5 weeks on average, earlier this year) – let alone the cost of buying a car. Taken together, the result is that young people are increasingly being priced out of driving.
Fewer young people now hold driving licences than in previous generations. The number of 17−20 year-olds with a full driving licence fell from 48% in the early 90s to 29% in 2014. For 21−29 year-olds, the fall over the same period was from 75% to 63%.
Those who do hold licences are making fewer journeys too, with 36% fewer trips per person for under-30s in a similar period (1995–99 and 2010–14).
Why is this a problem?
For young people, the ability to travel for work, study, and leisure is more important than ever. With expensive housing , and work opportunities unevenly distributed throughout the country, affordable mobility is essential to personal and career development.
To make matters worse, the reduction in the number of young people driving has not been accompanied by significant improvements in public transport. Outside major cities, getting around generally requires having access to a car. As the post-COVID dust settles, fully-remote jobs are now relatively rare.
Young people are missing out on job opportunities, losing independence, and are increasingly reliant on older family members. This pulls increasing numbers of young people into major cities, placing them at the mercy of ever-increasing rents. It’s yet another brick in the wall that divides the haves and the have-nots – those who have affluent parents and those who don’t.
What can be done?
In the main, the problems outlined are not being driven by profiteering. The UK car insurance market is highly competitive. Many insurers posted losses in 2023 – the year that insurance premiums peaked.
What influences the fluctuating ratio between young and old drivers’ premiums is not entirely clear and will depend to an extent on insurers’ different pricing strategies.
One thing is certain, though – increased claims costs mean increased premiums. Consequently, there are two broad areas that policymakers should focus on to decrease costs for drivers as a whole and young drivers in particular:
- Stop the rise in car theft Around 130,000 vehicles were stolen in the UK in 2023-24, a 75% rise in the last decade. This is costing the UK (and UK car insurers) billions of pounds. UK authorities have been caught unawares by the new trend of high-value stolen vehicles being smuggled out of the country and sold abroad (see The Economist ‘Grand Theft Global’).Tackling this problem would bring down insurers’ costs. This will ultimately result in a reduction in all drivers’ premiums, including younger drivers.
- Reduce accidents across age groups We have seen that young drivers being safer hasn’t necessarily translated into lower prices. But if we can make the roads safer for everyone, this reduces costs for insurers. This should, in turn, reduce premiums in the long term. So any initiatives that reduce the number of accidents per driver on the road are welcome.
- Telematics insurance Thinking more specifically about younger drivers, the government should incentivise the provision and uptake of telematics systems. Telematics – or ‘black box’ – insurance uses GPS technology to measure how a vehicle is being driven. Insurers then use this data to assess if the driver drives safely or not, and vary their premiums accordingly. This can be a win-win for young drivers, reducing insurance costs and encouraging safer driving – similar to Vitality health insurance rewarding people with lower premiums for making healthy lifestyle changes.
- Tax reductions for young rural workers Not having a car affects opportunity most for those in rural locations, where the problem is not poor-quality public transport, but often non-existent public transport. The cost of getting to work is tax-deductible for the self-employed. The government should consider a tax deduction on car insurance for under-30s who drive to work in a rural area. This could be limited to those who earn under a certain amount, say £35k a year.
Improve public transport
Young people are being financially shut out of driving, but many would also present this as their choice, from an environmental standpoint. The reduction in the number of car journeys made by young drivers will have had environmental benefits, such as reduced CO2 emissions as well as less noise and air pollution.
The car insurance premiums young people currently face must be addressed, but ultimately, the only fair and sustainable solution for young as well as future generations is more investment in building a better, more integrated public transport network.
This would give more young people access to opportunities, without the negative environmental impacts or the worry about road safety.
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Photo by Francesca Grima on Unsplash