Parents bearing costs of kids' car insurance

02/11/2009

New research has shown that the recession has made it especially difficult for young drivers to afford the costs of running a car, with the financial burden falling on parents in many cases.

According to uSwitch, some 10 million drivers now have a second-named driver on their policy, with a quarter of these being their children.

In addition, the research found that the average age of a second-named driver has risen to 31, with the financial pressures brought on by the recession making it difficult for younger motorists to meet the financial costs.

Meanwhile, uSwitch says there has been a 30 per cent rise in cases of insurance fraud over the last two years, with fronting, where a car belongs to the younger driver but the insurer is told it is the parent's vehicle, increasing sharply.

According to debt solutions firm EuroDebt, "it is interesting that the advent of the ‘kidult’ has highlighted potential financial problems at both ends of the scale.

Older parents may be able to make meaningful savings on motor insurance premiums and other monthly expenditure if they stopped supporting grown up kids.

Younger people are heavily penalized in terms of motor insurance premiums and reliant on parents to continually subsidise them. This sometimes creates a grey area in terms of what is determined as ‘soft fraud’.

There is a strong correlation between financial stress and fraud on motor, travel and household insurances, but the reality is that majority of people are trying to make ends meet.

EuroDebt will undertake a complete review of someone’s financial circumstances when completing a financial planner at their face-to-face meeting, establishing the reasons why they fell into debt, how to optimize income and streamline monthly expenditure before looking at the level of unsecured debts and any arrears with priority creditors, like mortgage, rent, council tax and utilities. Insurance premiums are assessed as part of this process.”

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