Back‑seat guarantor could slash the cost of car cover for the young

VouchForMe in The Sunday Times, 2 June 2019

by Kate Palmer

Edward Crane, 19, drives an Audi A3 around Shipdham in Norfolk, where he lives with his parents.

Although his insurance costs more than £2,700 a year, the figure is hundreds of pounds less than drivers his age would normally pay.

That is because if Edward has an accident, it will be his mother, Helen — not just his insurer — who will have to foot the bill.

Edward has cut his costs by opting for a new type of guarantor insurance. The scheme, VouchForMe, claims to make cover more affordable for the young by asking their parents or friends to pay the excess if they make a claim.

VouchForMe does not sell insurance directly; instead it stores the credit card details of a person willing to pay if the driver has to claim. That person agrees to cover all or part of the excess, and signs a contract agreeing to be liable.

If Edward has an accident, Helen will be liable for the first £850 in damages and her son £250, because he has agreed a £1,100 excess with his insurer, Admiral, in return for a cut in his annual premium of £415. If he had opted for an excess of £250 with Admiral, his premium would have shot up to £3,118.

“People who know me would say I’m a safe driver,” said Edward, adding that his mother was eager to help him. “I’d obviously pay the money back if I had an accident,” he said.

It costs a driver £5 to set up a contract with VouchForMe, which charges 1% of the amount being pledged, and 2% of any sum paid out on a claim. This can eat up any savings made on the policy.

Edward could have taken out the Admiral cover and asked his mother to “vouch” for him unofficially, avoiding all these costs.

“Nowadays it’s become necessary for young people to swallow a bit of pride and ask their parents to help,” said Andrew Hagger, a personal finance specialist at Moneycomms. “While it seems like an interesting idea, anyone thinking of signing up to a guarantor arrangement should factor in the extra costs,” he added.

Matt Peterman, chief executive of VouchForMe, launched the service in February and hopes to be able to sell specialist policies for young drivers, with a higher excess, directly through the platform in the next few months.

“If you’re 17 or 18, most insurers don’t have a clue about your driving,” said Peterman. “The fact a family member is willing to pay for a possible claim should reassure insurers that this person is a safe driver and potentially lower their premiums.”

The mortgage market is more usually where younger people are offered guarantor arrangements, as a way to help first-time buyers get on the property ladder.