THE FACT OF HIGHER COST OF AUTO INSURANCE POLICT
FOR YOUNG DRIVERS
Beomsuk Seo
Johnson & Wales University
Feinstein Graduate School
RSCH 5500
Professor Martin W. Sivula Ph. D.
November 12th , 2013

Author Note

Beomsuk Seo, Master of Business Administration Hospitality Concentration,
Feinstein Graduate School, Johnson & Wales University
For course: RSCH 5500: Business Information and Decision Making Professor Martin Sivula, Ph.D.
November 12th 2013
Contact: bks523@wildcats.jwu.edu

Abstract
The study was designed to define the fact of automobile insurance companies' higher prices of their policies for young drivers. Automobile insurance policies come in a board range of prices depending on the drivers’ status, experience, car condition, and so on. The majority of car insurance companies have various discount options depends on vehicle equipment, driving history and habits, driver's education and affiliation for their policy holders, yet young drivers who aged 24 and less pay approximately double price of other aged drivers because insurance companies recognize young drivers as high risky drivers. This study will qualitatively and quantitatively examine the level of risky driving behavior by aged groups with 400 samples. Then, the research will define the relationship between risky driving behavior and young drivers aged 24 and under. Additionally, the study assume that there is relationship between risky driving behavior and drivers experience.
Keywords: young driver, insurance, risky driver, novice driver, car crash, expensive

I. Statement of the problem
In 2011, there are approximately 211.87 million licensed drivers in the U.S. and its rate is 84.6 percent of total U.S. population. In the same year, 253.10 million automobiles were registered in the U.S.(United States Department of Transportation, 2013). This is a huge market which has about 166 billion U.S. dollar estimated market size (StoneRidge Advisor, LLC, 2012). Average auto insurance rates are widely affected by age. According to the CarInsurance.com, six months auto insurance policy average price range for 2004 Honda Civic LX by four major auto insurance companies: Travelers Insurance, Direct Insurance, Esurance, and Safeco Insurance, including a full comprehensive and collision policy, that offers limits which are considered to be standard coverage limits in most states is $860 to $2290; they categorized the age as 24 years old and under, 25 to 29 years old, 30 to 39 year old, 40 to 49 years old, 50 to 59 years old, and 60 years old and over (CarsDirect.com, 2013). The reason that most auto insurance companies charge more money for younger drivers aged 24 and under, is that the companies recognize the young drivers as high risky drivers because they have less driving experience than other drivers.
This study mainly focuses on investigating the relationship between car accident rates and drivers' age. In order to support the object, the research might define another relationship between car accident rates and drivers' experience; some young drivers have more than 6 years driving experience, which is sizable discount condition that auto insurance companies provide. II. Literature review
There are several studies that have explored car crashes involving young drivers to define the relationship between car crashes rates and age with different methods. However, most of paper represented that young drivers have potential possibility of car accidents. Some researchers indicate that the risky behavior associate with psychological distress and young drivers easily feel the psychological distress such as depression and anxiety because of un-protected sex, cigarette smoking, and drinking alcohol; those risky behavior effect on their driving (Scott-Parker, Watson, King, Hyde, 2011). As they reported in 2011(p. 275-277), there was a weak but significant correlation between risky driving behavior and psychological distress. In Queensland, Australia in 2008, 22.3% of fatalities by car crashes were young drivers; moreover, the young drivers were involved in 29.9% of fatally injured accidents. The young drivers seem not to control their emotions during driving and this fact leads the drivers to risky driving behavior. Young drivers’ risky driving behavior is not only regarded by psychological stability, but also their driving habits. Young drivers are more familiar with personal digital gadgets such as cell phone, tablet PC, and so on. They might spend more time to use such devices than other aged drives. Moreover, life-style of young drivers, listening to music loudly, drunken driving, and over speeding could effect on accident rates. Olsen, Shults, & Eaton, (2013) investigated texting with driving for high school students. 44.5% of students have used cellular during driving (n=8505); 57.7% of high school student drivers aged over 18 used cellular among the age group. They do not have strong perception about using cellular with driving is quite dangerous. There are many driving behavior that can distract young drivers besides using cellular. A study indicates that teen drivers usually drive the car with other teenager passengers and this situation causes high potentiality of car crash. According to the survey result (Ginsburg et al., 2008), teenagers witness numerous behaviors often or always with teen drivers; teen drivers' over speeding, smoking with driving, wearing makeup, dancing and singing, racing others cars, and getting lost are highly ranked.
While some researchers attribute the reason of young drivers' high cost auto insurance to the young drivers' driving behavior and lift-style, other researchers assume that the reason is their lack of experience. Enough driving experience is one of huge discount options from most insurance companies; however, experienced young drivers still pay higher insurance. The collision rate within 24 months after drivers get licenses show us a great difference between age groups; crash rate of age 19 in their first year is about 160, crash rate of ages 25 to 34 is about 115, ages over 35 is about 90. After second year, the rates of each age group are measured as about 100, about 95, below 50. It represents that after 24 months, teen drivers' crash rates significantly decrease from their first year and teenager groups' reduction range is the largest compare with other aged groups. Young drivers crash rate is higher than others (Mayhew, Simpson, & Pak, 2003). III. Method
Sample and data collection:
The data will be collected from 400 conditional selected sample ( = 0.05) to infer infinite population; the sample must have driving experience. The sample will be categorized as follow variables, age and driving experience. There will be two groups of ages: drivers aged 24 and under, and drivers aged 25 and over. Driving experience can be characterized as under and above 5 years. Gender and other demographics are not important for this study.
Questionnaire:
The psychological distress will be measured by Kessler Psychological Distress Scale (K10): 10 items of 5 point Likert scale from 1 (none of the time) to 5 (all the time) that can score based on respondents' recent 30 days experience. The maximum score is 50 indicating severe distress, the minimum score is 10 indicating no distress. The risky level of drivers' behavior will be measured by 4 point Likert scale from 1 (never) to 4 (always). The questions will ask frequency of risky driving behavior. Demographics will be given to respondents to distinguish age group and driving experience.
Data analysis 1:
There will be two data analysis for samples. 400 samples will be categorized by ages group and driving experience. They will be scored by K10 scale and the risky level of drivers' behavior. Chi Square test will be applied to analyze the data collected. Each group will be determined with score of the questions to measure level of drivers' risky behavior by age and driving experience.
Data analysis 2:
Regression analysis will be applied to measure the relationship between risky driving behavior and drivers aged 24 and under, risky driving behavior and drivers experienced 5 years and under. X-axis will be age and driving experience year, Y-axis will be total score of the risky driving behavior scale. Since the relationship is measured, hypothesis test will be applied to evaluate the relationships with Z-test (n 30).
H01: There is NO significant relationship between risky driving behavior and young drivers.
HA1: There is significant relationship between risky driving behavior and young drivers. H02: There is NO significant relationship between risky driving behavior and driving experience. HA2: There is significant relationship between risky driving behavior and driving experience.

This research is statistical analysis in quantitative method and qualitative method examining the relationship between risky driving behavior and age, risky driving behavior and driving experience. Finally, the result of this study will define the fact of higher cost of auto insurance for young drivers.

References
Anne T. Mccartt, Daniel R. Mayhew, Kelia. Braitman, Susan A. Ferguson, Herbert M. Sompson (2009). Effects of Age and Experience on Young Driver Crashes: Review of Recent Literature. Traffic Injury Prevention, 10:209–219. doi: 10.1080/15389580 802677807
CarInsurance.com (2013). The Average Car Insurance Rates by Age. Retrieved from http://www.carsdirect.com/car-insurance/the-average-car-insurance-rates-by-age
Emily O' Malley Olsen, Ruth A. Shults, Danice K. Eaton (2013). Texting While Driving and Other Risky Motor Vehicle Behaviors Among US High School Students. The American Academy of Pediatrics. Retrieved from http://pediatrics.aappublications.org/content/131/6/e1708.full.html
Kenneth R. Ginsburg, Flaura K. Winston, Teresa M. Senserrick, Felipe Garcia-Espana, Sara Kinsman, D. Alex Quistberg, James G. Ross, Michael R. Elliott (2008). National Young-Drivers Survey: Teen Perspective and Experience With Factors That Affect Driving Safety. The American Academy of Pediatrics. Retrieved from http://pediatrics.aappublications.org/content/121/5/e1391.full.html
Kessler RC, Barker PR, Colpe LJ, Epstein JF, Gfroerer JC, Hiripi E (2003, Feb). Screening for serious mental illness in the general population. Arch Gen Psychiatry. 60(2): 184-189.
Scott-Parker B, Watson B, King M, Hyde M. (2011). The psychological distress of the young driver: a brief report. Injury Prevention: Journal Of The International Society For Child And Adolescent Injury Prevention, 17(4), 275-277. doi:10.1136/ ip.2010.031326
StoneRidge Advisor, LLC (2012). Non-Standard Auto Insurance Market Overview & M&A Trends. Retrieved from http://www.stoneridgeadvisors.com/Content/View_From_The_Ridge_August_2012.pdf
United States Department of Transportation (2013). 2011 Motor Vehicle Crashes: Overview. Retrieved from http://www-nrd.nhtsa.dot.gov/Pubs/811701.pdf
United States Department of Transportation (2013). DISTRIBUTION OF LICENSED DRIVERS - 2011. Retrieved from http://www.fhwa.dot.gov/policyinformation/statistics/2011/pdf/dl20.pdf
United States Department of Transportation (2013). Number of U.S. Aircraft, Vehicles, Vessels, and Other Conveyances. Retrieved from http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_01_11.html
United States Department of Health and Human Services Youth (2012). Risk Behavior Surveillance — United States, 2011. Retrieved from http://www.cdc.gov/mmwr/pdf/ss/ss6104.pdf
United States Department of Transportation (2008). Traffic safety facts young drivers. Retrieved from http://www-nrd.nhtsa.dot.gov/Pubs/811169.PDF