What it means
Insurers price motor policies by estimating how likely a driver is to claim and how large the claims will be. Most customers fall into the standard or preferred categories, with clean records and stable histories.
Drivers who do not fit are placed in the non-standard market, sometimes called high-risk insurance. Common reasons include drink-driving convictions, several at-fault accidents, a history of unpaid premiums, driving without cover, a young age with no track record, or owning a vehicle that is expensive to repair.
Insurers that specialise in this market accept the risk but charge a premium that reflects it. Compared with standard policies, non-standard cover often has higher premiums, larger deductibles (the part of a claim the driver pays), tighter terms and fewer extras.
Some policies give only the minimum cover required by law. Premiums may also be payable in larger instalments or up front, because the insurer faces a higher chance of non-payment.
The market also matters to businesses. A company that lets employees drive for work, or that hires drivers, needs to understand whether those drivers are insurable on a standard basis, because a single non-standard driver can raise the cost of a fleet policy.
For the driver, a non-standard policy is often temporary. After a period of safe driving without claims, the record improves and the driver can usually move back to a standard insurer at a lower price.
Shopping around once a year is therefore worthwhile. Regulation varies by country and state.
Some places run assigned-risk or residual market plans so that every licensed driver can find cover, even when private insurers decline them, and the rules about cancellation and rating can also differ.
In practice
Real-world examples.
Example
A delivery driver with a drink-driving conviction is refused by mainstream insurers. A specialist non-standard insurer offers cover at $3,000 a year with a higher deductible, and the driver treats the extra cost as a business expense of staying on the road. After three years without a claim, the driver plans to ask mainstream insurers for quotes again.
Example
A student aged 19 with no previous insurance is quoted $2,400 a year by a standard insurer and $1,900 by a non-standard one that offers a smaller set of benefits. She chooses the cheaper policy and installs a tracking device to earn a discount. The device records speed and braking, and good scores can reduce her renewal price.
Example
A small courier company discovers that two of its ten drivers have recent claims. Its fleet insurer adds a surcharge of $4,000 across the policy, so the owner reviews who should drive the vans. She moves the two drivers onto short local routes while they rebuild a clean record.
Formula
Calculation
Premium increase % = (Non-standard premium - Standard premium) / Standard premium x 100
A driver with a clean record pays a standard annual premium of $1,200. After two at-fault accidents, the same driver is quoted $2,100 by a non-standard insurer. Increase = ($2,100 - $1,200) / $1,200 = $900 / $1,200 = 0.75, or 75%. Over three years, the extra cost is $900 x 3 = $2,700, which is why improving the driving record and returning to the standard market matters. If the driver also raises the deductible from $500 to $1,000, the premium might fall further, though a larger share of any claim would then be paid by the driver.Case study
Seen in the real world.
Marlowe Courier Services is a fictional delivery business invented to illustrate this idea. It employed twelve drivers and paid $36,000 a year for a fleet policy, but two newly hired drivers had recent at-fault accidents.
At renewal the insurer treated these drivers as non-standard risks and added $6,000 to the premium. The owner compared the cost with the value of the two drivers' deliveries and found that each added about $9,000 of margin, but the claims history made the extra premium worthwhile only if they stayed accident free.
Marlowe kept both drivers, sent them on defensive driving courses and installed cameras in the vans. A year later the insurer removed the surcharge, and the owner introduced a standard check of driving records before hiring. The check now takes ten minutes and has saved the company several thousand dollars.
Watch out
Common mistakes.
- Assuming a non-standard policy is unsafe or low quality. It can be a legitimate regulated product, but it often has higher prices and tighter terms.
- Accepting the first quote without comparing. Specialist insurers vary widely in price for the same driver.
- Staying in the non-standard market after the record has improved. After a period without claims or convictions, most drivers can return to the standard market.
Questions
People also ask.
Why is non-standard insurance more expensive?
Insurers expect more claims from these drivers, so they charge a premium that covers the added risk.
Can a business be affected by it?
Yes. A company with high-risk drivers may pay a higher fleet premium or find it harder to get cover.
Is non-standard insurance legal for meeting the minimum cover requirement?
Generally yes, provided the policy meets the legal minimum, but the driver should check the terms.
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