Why are auto insurance rates higher for younger drivers?
• Ans: Insurance rates are based on the average experience of a group of persons with similar characteristics (classification). Young drivers historically have had poorer loss experience (both in the frequency of accidents and the cost of those accidents) than older drivers. By charging young drivers higher rates, those drivers pay their fair share of insurance costs and older drivers are not asked to subsidize them. In addition, rates are generally higher for males because, consistently, female drivers incur fewer and/or less severe claims than males.
Young drivers have statistically shown poorer loss experience than other drivers. In other words, they have more accidents because they have less driving experience than other drivers. Rates are structured so that drivers with greater frequency or cost of accidents pay higher rates than drivers with lower frequency. Rates are based on the average experience of a group of drivers with similar characteristics, so young drivers as a group have higher rates.
Insurance rates are based on the average experience of a group of persons with similar characteristics (classification). Young drivers historically have had poorer loss experience (both in the frequency of accidents and the cost of those accidents) than older drivers. By charging young drivers higher rates, those drivers pay their fair share of insurance costs and older drivers are not asked to subsidize them. In addition, rates are generally higher for males because, consistently, female drivers incur fewer and/or less severe claims than males.
