Playing the numbers game……

My daughter is now old enough to drive and I have been doing the rounds of insurance companies to find out much it would cost us to allow her to drive one of our cars. The answer? A prohibitive amount that is how much. It is seemingly cheaper for her to buy an old banger and insure it herself.

I suppose I should defer to the insurers on this. They have the stats to back up their case. Clearly payouts on accidents for young drivers must be almost 20 times those of their older and allegedly better drivers or else they would not charge the premiums they do would they?

And yet I am slightly suspicious of the whole thing. My twenty odd years of working in finance has convinced me that you can do almost anything with numbers. By excluding this, or by highlighting that, a case can be made for almost any interpretation. It is one of the reasons why I am so cash focused when looking at any set of accounts.

Another example of the potential misuse of numbers could be the current approach to university fees. The argument being advanced is that statistics prove that students with a degree go on to earn oodles more than their contemporaries who are degree-less. They probably did in the past, but that was when, say 20%, of the working population had degrees. The next twenty years I would venture to suggest could be slightly different now you have almost 50% of school students going into higher education. Based on a questionable interpretation of some numbers, a simple solution, higher fees, has been introduced rather than a more considered review of what higher education could and should be doing to provide what the country needs going forward.

Whenever I look at numbers I am forever trying to read between the lines, as it were, looking for the story that is not being told. Cash behaviour is one pointer to what is really happening. The context in which the numbers are being presented is another. When I doing a credit check I don’t just look at the numbers. I look at the business, the website, the directors, anything that helps me get a fuller picture. If I don’t do this, and solely rely on the numbers, then there is a serious risk of a wrong decision being made.

Fortunately there are some more cost effective insurance options available and I am sure my daughter will be on the road shortly. However I do worry about how the attitude to young drivers now will affect driving standards in the future. Yes they will make mistakes and some of them sadly will be tragic. However there is no substitute for being out on the road, and if historical statistics are being used to deny young drivers the opportunity to gain that experience, the long term results could be far worse than those which the insurance companies believe they are trying to avoid now.

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