The traditional car insurance model may be outdated, as many young Brits who are infrequent drivers feel confined by costly annual contracts. What about cover for the summer holidays, the weekend or even the hour? On-demand insurers are looking to deliver just that. Revved up car insurance premiums February may have been a short month this year but it certainly didn’t seem that way to insurers, with the Ministry of Justice announcing it will be slashing the personal injury discount rate from 2.5% to -0.75%, resulting in significantly higher claim costs for insurers. The Association of British Insurers (ABI) labelled the decision ‘crazy’, with young drivers likely to face the biggest premium hikes as insurers will inevitably try to recoup (and pre-empt) extra costs in an effort to – at the very least – balance their books. Young people already cite the cost of premiums as a barrier to learning to drive. This presents an opportunity for providers that are willing to do things a bit differently. Rewards for safe driving Just 3% of 17-24-year-olds who own car insurance currently have a policy whereby the premiums are based on their driving habits (using data sent from a smartphone app or a device installed in their car). Yet more than half of these younger consumers are interested in taking out a form of telematics policy. Consumers are generally hesitant about sharing data with brands, as many are eager to protect their privacy. However, Mintel research commonly shows that young consumers are the most willing to share personal information, particularly if offered clear benefits in return. Providers claim that the vast majority of drivers taking telematics policies receive lower premiums as a result, with Aviva claiming that safer drivers save £170 a year on average. Gearing up for the sharing economy Whilst greater uptake of telematics policies can help young drivers afford to remain on the roads, the emergence of a newer trend could revolutionise the way in which young people purchase car insurance. The pay-as-you-go insurance model, offered by the likes of Cuvva and Just Miles, allows drivers to get cover by the hour or per mile through logging journeys on a smartphone app each time they require coverage. With consumers charged a small fee for each journey on top of a monthly subscription, could this be the car insurance market’s ‘Netflix moment’ as consumers switch to on-demand alternatives? Fixed annual policies no longer suit the growing number of part-time or infrequent drivers who have turned their back on car ownership. Mintel Trend “Why Buy” highlights that consumers living in cities have re-evaluated whether they actually need to own items outright given their limited space and resources, a trend which has spread to the car market. Fewer young consumers are buying their own vehicle and some are even putting off learning to drive. As a result, car sharing and car rental could rocket in popularity over the coming years with over two thirds of 17-24s interested in using these schemes in the future. Pay-as-you-go insurance models appear perfectly poised to meet the needs of today’s young drivers. Paul Davies is a Senior Financial Services Analyst at Mintel, researching and writing UK financial services reports. Prior to joining Mintel, Paul held marketing roles within the Consumer Electronics sector for retailers such as Comet, as well as manufacturing companies including Binatone Telecom PLC. Paul has been a key speaker at Mintel’s Big Conversation events and has presented at McCann’s Digital 360 conference. You might also be interested in: Activity trackers could boost pet insurance sector Thought Bubble: Automotive subscription models Insurance Marketing Trends 2016: How’d we do?