Question

Insurance companies charge young male drivers much higher rates until they get to be 25. Discuss you understanding why that should or should not be the case!

Answer 1

Insurance companies charge young male drivers much higher rates until they get to be 25, for the following major reasons:

1. These drivers are riskier investments similar to bad credits (those who don't have the ability to repay a loan but still take one) so insurance companies to get compensated for high risk, seek higher return in the form of higher premium.

2. Young male drivers <= 25 years are riskier due to their fervent nature, making them more prone to misbehaviours and mishappenings on road.

3. One gains experience in driving on road, over a period of around 7-10 years, to get their hands settled on the steering, the road, the rules, etc. and by the end of this time he crosses the 25 year age mark.

4. Data shows that men drive, on average, more kilometres than women. Because men spend more time on the road than women, they become inherently riskier, simply because they have a greater chance of getting into an accident.

5. Globally, male is the dominant population gender and since insurance is a mandory decree by the government, it makes sense for an insurance company to charge higher premium from the higher male population.