Pricey premiums could push young drivers off road locally

A LOCAL insurance broker has set his business interests aside to warn prospective young drivers to ‘think very carefully’ before splashing out on their first car.

As astronomical insurance premiums continue to put pressure on local motorists, Brendan McAleer, chief executive of Omagh’s Peter McAleer Insurance Ltd, has issued a remarkably candid warning to a portion of his potential future customers.

“Unless you have the money to buy, insure, fuel and maintain your first car, don’t do it,” he said, speaking with the Tyrone Herald.

“There is no better way to lose money than to purchase a depreciating asset, which is exactly what a car is,” he said.

“There is an expectation on youngsters these days that says once they turn 17 they should take their test and get on the road.

“I would encourage anyone in that position to think hard and long about whether they can actually afford it. Do you really need a car, or is there a more economical alternative? What about public transport, car pooling, helping a friend cover part of their fuel or insurance costs?

“I know these might not seem like ideal solutions to a 17-year-old that is desperate to get on the wide open road. But, for most young people, driving is very expensive.

“In a lot of cases, you end up putting all your money into your motor and then not being able to save a penny.”

‘Unaffordable’

In the past month, the Tyrone Herald has received numerous reports from parents claiming the premiums being quoted to their teenagers are unaffordable.

One mother said, “My son is on his third year of driving, has two years no claims, and last year he paid £1600. Recently, he just got his renewal quote and it’s £2000. It’s ridiculous; his car isn’t worth much more than that but that’s the cheapest quote we could find.”

Another said one insurance company argued the most competitive price they could insure her two 17-year-olds for was £10,400.

“How can any company justify that crazy money?,” she asked.

To help answer that question, we turned again to Brendan McAleer.

“The bottom line is that insurance companies are businesses; they are glorified bookies. They bet on not having to pay out claims. As everybody knows, a bookie that keeps taking bad bets doesn’t last long,” explained Mr McAleer.

Insurers earn a profit when the amount of money they make on policies exceeds what they pay out in claims and overheads. Mr McAleer said that when this difference starts to narrow, companies increase their premiums in an effort to widen the margin again. This has been the case for the last few years.

“The insurance industry is one of the stupidest in the world. Every seven to 15 years they make the same mistakes. They put prices up in an attempt to recoup losses, then, once they feel financially stable again, they drop them again to try to attract more customers. This means that the insurance market is rarely on an even keel. Customers can’t predict what their next renewal is going to cost, and the insurers then find it hard to forecast what their next few year’s earnings are going to be,” said Mr McAleer.

We concluded by asking Mr McAleer what direction he believes insurance prices are likely to go next.

‘Drop’

“I have no crystal ball, but I would say that in the next year or two we will see prices start to drop. In the near future, I think they will begin to either go sideways or downwards. Maybe not by a huge amount, but I am fairly confident that we have reached peak insurance prices.

“At present, customers are, pardon my terminology, getting screwed, and insurers are making serious money.

“However, this period of over-correction will likely be followed by one of rationality. When that comes, customers should see quotes return to a fairer, more reasonable rate.”