Car Insurance Study: Fewer Teens Insured in Slow Economy

Barbie distracted while drivingAsk a teenager any one thing, and you’ll likely get 10 different answers.

But when it comes to why fewer teens are getting insured, the Highway Loss Data Institute (HLDI) has a simple answer:

“No jobs, no cars.”

That was the headline of the most recent study from the Institute, which delved into issues of teenage car insurance purchases and licensure to find out why rates for both have declined in recent years.

With “many media reports speculating that the economy is the driving force behind” fewer teens behind the wheel, the Institute said its own findings confirm that the drop in teenage licensure and insurance coverage coincides with recent sluggishness in the economy.

‘Just Can’t Afford to Drive’

The HLDI found that, when looking at collision policies in households across 49 states and the District of Columbia, the number of teen drivers listed on those policies fell 12 percent between 2006 and 2012.

But at the same time, the size of the teenage population fell by only 3 percent.

“It looks like teens just can’t afford to drive,” Matt Moore, HLDI’s vice president, said in a statement. “Paying for their own cars, gas and insurance is hard if they can’t find a job. At the same time, kids who count on Mom and Dad to help them also may be out of luck if their parents have been affected by the recession.”

HLDI researchers found teen drivers by identifying “rated drivers” for each household’s policy. A “rated driver” in a household is the driver who has “the greatest loss potential” for an insured car, which the Institute said was “usually the teen driver.”

In its study, the HLDI also broke down figures for rated drivers between 35 years old and 54 years old, calling them “prime-age” drivers. Analyzing the separate age group “provided a control for changes in the number of teen drivers due to factors not specific to teenagers,” according to the Institute.

Researchers found that, in 2006-12, the number of prime-age drivers “also fell, but not as sharply as teen drivers.”

“The result was fewer teen drivers relative to prime-age drivers,” the Institute said, meaning the number of teens insured showing up on the policies fell faster than prime-age drivers.

The HLDI also found that teens were facing a tougher employment picture in that seven-year period than their prime-age counterparts. Teens saw unemployment rates jump by 11 percentage points for teens, compared to 5 percentage points for prime-age workers.

According to the Institute, the gap in unemployment rates between the two age groups widened in 2006-10 “at the height of the recession” and evened out after that period.

The recession may have combined with high unemployment figures and rising car ownership costs to “doubly affect” teenagers, the study said.

Car Ownership Costs Up

The AAA, which conducts annual surveys on the costs of car ownership, says in its latest survey that the average cost of owning a car is up this year compared to last year. The rise in overall vehicle costs for a sedan increased by nearly 2 percent from last year, driven up mostly by pricier maintenance, insurance and fuel.

The HLDI said such circumstances would likely push a teenager “not to drive and insure their vehicle.”

The AAA Foundation for Traffic Safety also studied teen licensure rates in a summer survey in which teenagers reported their top reasons for not getting licensed. The survey found that:

  • 44 percent of teens said they were not licensed by 18 years old because they had “no car”
  • 39 percent of teens said it was because they “could get around without driving”
  • 36 percent of teens said it was because “gas is too expensive”

Bruce Hamilton, the foundation’s manager for research and communications, said that it was a telling fact that two of the top three reasons were related to the economy.

“Getting licensed was about driving costs in general,” he told Online Auto Insurance News (OAIN). “To us, this was an indication that there is a cost barrier or economic concern that’s impacting their ability to get licensed at the age that teens before them had usually got their license.”

Yet another survey from the University of Michigan surveyed teenagers for the top reasons they were “not getting a driver’s license.”

“Too expensive” was the second-most cited response.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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