Nick Corrie, Trakglobal CEO, on Insurance Premium Tax and Young Drivers

This story appeared in Post Magazine (4 August), written by Francesca Nyman

Hopes of securing an exemption from the insurance premium tax hike for young drivers are dwindling, despite “constructive” talks between industry figures and the Department for Transport last week.

Representatives from the British Insurance Brokers' Association, several insurance companies and the Parliamentary Advisory Council for Transport Safety met with the DfT last Wednesday (29 July) to make the case for drivers aged 18 to 25 with telematics boxes being spared the IPT rise from 6% to 9.5% from November this year.

While organisations such as the Road Safety Foundation have been campaigning against the disproportionate level of IPT paid by younger motorists for several years, the further increase unveiled in the summer Budget has sparked fears more young people could risk driving without insurance.

Graeme Trudgill, executive director at Biba, told Post the lobbying party had "made the point to the DfT that young drivers already make up the largest part of the uninsured driving population and they don't have the largest salaries", adding that he felt the message had been heard "loud and clear".
As far as Biba is concerned, there is a compelling economic case for sparing this segment from the IPT hike, he added.

"Research shows that there is a 40% reduction in accident rates [with a telematics box]. There's an issue about whether it's self-selection or whether it's the device but our argument is that it doesn't matter either way," he said.
"On the current rate there are savings of £500m for government over seven years. We've written formally to [Chancellor of the Exchequer] George Osborne on this this week."

Biba will meet with representatives from HM Treasury next week to try and press the industry's case, however Trak Global managing director Nick Corrie said he was doubtful the sector's argument would be heeded.
"The [talks with the DfT] were helpful and constructive but I just don't think they'll [support the exemption]," he said.

Describing IPT as "a regressive tax" that disproportionately impacts young drivers because of their higher premiums, Corrie said the industry would carry on lobbying but said he was "not optimistic" that the Treasury would be persuaded to move its position.

"By the end of the meeting the room began to agree that it is very difficult for the DfT to [recommend] an exemption to Treasury without evidence that telematics policies reduce accident frequency," said Corrie.

The central sticking point remains the Treasury's desire for evidence that telematics policies reduce the number of accidents recorded on UK roads, which will not be available in the short term.

David Davies, executive director of Pacts, told Post the DfT's ongoing research project on telematics and young driver safety was probing this very question, but was unlikely to report its findings this year.

"We still don't know whether telematics reduces risk or if the lower accident rate is because of the self-selection benefit," he explained. "The trouble is, it's probably going to take a couple of years before the research delivers some conclusive results. In the meantime there is still the issue of young driver safety."

According to Davies, one option might be for a trial insurance premium discount for those using black box technology to see if this reduces accident frequency in the young driver segment. "[Government] has used tax discounts to incentivise cleaner cars [as in the case of the removal of road tax for electric cars] so why not use them to improve driver safety?" he said.

While the industry will continue to make the point the IPT increase is unfair on young drivers, in the meantime the market should look to see if it can solve the problem itself, Corrie said.

"The smart thing is to try to solve the problem ourselves through ingenuity. Commercially, we're able to offer much cheaper policies for young drivers than we could a few years ago and still remain profitable," he said.
However, Ed Rochfort, product director at Carrot, described the IPT increase as "a separate problem".

"Every telematics firm worth its salt is continuing to do more with the data - getting better at risk management, customer engagement and encouraging improving driver behaviour, which should lead to reduced premiums," he commented.

"The market is solving the problem [of prohibitively high motor policies for young drivers] but this is a separate problem."
"I don't see that there is a justification for young drivers who are least able to afford it, paying four or five times the amount of their parents who are much more likely to be able to afford it?"

Tim Marlow, programme director at Ageas, told Post the insurer had long believed IPT was unfair on younger motorists.

"We were already supporting the campaign by the Road Safety Foundation," he said. "We are currently preparing a revised business case in the light of 9.5% IPT from 1 November."