Is car trade insurance stopping young people from being entrepreneurs?

In the last week we have read how car insurance is now rising FIVE times faster than inflation. With young people, under 25, struggling to find policies for less that £1719 to keep a car on the road. If quoted this for your personal car, it will clearly be even higher to get suitable coverage for an hoping to enter the car trade sector.

For motoring businesses who are established, it is difficult to understand the struggles that budding entrepreneurs face who want to break into the industry. Many older clients complain about the cost of their trader’s coverage but this is a small fraction that younger people pay.

Is it possible to set up a car company when under 25?

There are new traders and this is testament to the determination of younger people who have started an enterprise in this sector. One example is Corys Car repairs who were able to start their enterprise using a grant from The Princes Trust. This is a scheme set up to help under 25 year olds get their commercial idea off the ground.

But it is certainly more difficult and the lack of underwriters who are willing to offer coverage to this group is a contributing factor. It can be frustrating, as mechanical skills are typically a work placed learning path. By the age of 21 many employees have been working for other for up to 5 years! They have very detailed insights to all areas of the company’s work and customers.

But there are young mechanics who have succeeded, such as Cory’s Car Repairs, and this can act as a further incentive. They have managed to seek the funding that they need to get started. They have ignored the naysayers.

Why is insurance the biggest barrier to entry?

Plenty of underwriters will tell you up front they won’t cover start-ups. So how about those making it work in this industry? They ignored these limiting beliefs and made it work. There are always options for those who are determined to succeed. This is not to say that it will be easy.

Not only because the driver is younger, also because of the extensive lists of risks that need to be underwritten for this type of policy, prices will remain high. In fact this is true not just for young entrepreneurs, but for any start-ups in this sector who have not built up substantial no claims discount.

What can young traders do to reduce the impact?

For under 25s they will know from their personal policy, important things need to be done to get the best deal. For example having another more experienced driver named on the policy. Becoming a partnership with another more experienced motor industry professional etc. Utilising available black box technology. Brokers will work with their clients to help them to understand any other ways that it can be reduced. Some of this advice will be specific to this niche product and experts in this sector will be happy to help.

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