Teen Driving Restrictions May Pay Off for Parents: Some Insurers Dropping Rates After Change in Law

By Denise Trowbridge, The Columbus Dispatch, Ohio

Apr. 25--Parents with teen drivers might get a break on their car insurance bill, thanks to a new law limiting the privileges of teens behind the wheel.

Changes to Ohio's driving-license law, which went into effect April 6, limit the nighttime hours teens are allowed to drive and the number of passengers they can have in the car.

In states with similar laws, auto insurance rates are dropping along with the teen accident rate.

"States with (licensing) laws like Ohio's are really starting to see the benefits," said Mary Bonelli, spokeswoman for the Ohio Insurance Institute.

"Insurance companies are starting to see lower losses from teen drivers, and are turning around and passing those savings on to customers."

In June, Grange Insurance will lower insurance rates for 16-year-old drivers by as much as 5 percent. Young male drivers likely will see the biggest savings, because their rates are higher. The lower rate will apply immediately to new policies and will go into effect for current policies in July.

Allstate lowered its rates for teen drivers last summer in anticipation of the law, spokeswoman Lisa Finney said.

State Auto has lowered rates for teen drivers by 5 percent to 10 percent during the past 18 months, and it will consider further reductions if the new rules for teen drivers produce results, said Joel Brown, vice president of personal insurance.

Other companies, including Nationwide and State Farm, are taking the wait-and-see approach. If the new law lowers the accident rate for teens, they'll consider lowering premiums.

State Auto does business in other states with similar license laws, and overall, they have had a positive impact on teen accident rates, Brown said.

The overall crash rates for teenagers fell 23 percent in states that have teen licensing laws similar to Ohio's, according to a study by the Ohio Department of Public Safety. As of February, 43 states had a three-stage graduated licensing program, in which teens earn more driving privileges as they get older.

The passenger clause of the law might have the greatest impact.

Passengers significantly increase a teen's chances of having an accident, according to the Insurance Institute for Highway Safety, a national nonprofit organization. One passenger doubles the risk, two passengers triple the risk, and three or more increase the risk sixfold.

Car insurance for teens can take a big bite out of family budgets. A parent adding one teen driver to a policy should expect their annual premium to just about double, Bonelli said.

The average auto policy in Ohio cost $672 in 2004, according to the National Association of Insurance Commissioners. Adding a teen could boost the cost of an average policy to $1,344, Bonelli said.

The actual price will vary. The price for teen drivers depends on their driving record and who else is on the auto policy, what vehicle they drive, how the vehicle will be used and where they live. Insurance rates for male drivers also are higher than for females.

But there are other ways to curb the costs.

Some insurance companies give discounts to students who have at least a B average in school, are on the dean's list or score in the top 20 percent on standardized tests such as the SAT or ACT.

Teen drivers who take a safety course also might qualify for lower insurance rates.

Allstate will reduce rates up to 15 percent for teens who complete the company's online safety course, Finney said. State Farm gives an average 15 percent discount for young drivers who complete its driver-safety program.

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