New Vehicle Risk Ratings Replace UK Car Insurance Groups to Bring Clarity on Costs
The car insurance landscape in the UK is undergoing a significant transformation. Replacing the existing car insurance group ratings, a new system called Vehicle Risk Ratings (VRR) is being rolled out. This change aims to give consumers a clearer understanding of car insurability and associated costs. The VRR system assesses new vehicles across five key areas: performance, damageability, repairability, safety, and security.
VRRs have been introduced for vehicles sold from August 1st this year. While the specifics are still developing, the goal is to offer a more granular and accurate assessment of risk compared to the current 1-50 group rating system. Thatcham Research, the industry’s data intelligence company, is developing the VRR system.
According to a Thatcham spokesman, “Vehicle Risk Rating (VRR), which represents an evolution from the current 1-50 group rating system, aims to transition the industry towards a more granular modelling approach for car insurance.” New vehicles will continue to be assessed under the existing group rating system alongside the VRR system for at least the next 18 months, during which time both sets of scores will be published. The VRR data will be made available to consumers once a critical mass of data has been accumulated, potentially as early as 2025.
Mark Shepherd, head of general insurance at the Association of British Insurers (ABI), welcomed the move. He stated, “The new rating system is a great step forward to allow more detailed risk assessments of the changing automotive landscape. We also hope it will encourage manufacturers to consider things like security and repairability more closely when designing new cars for UK roads.”
The new system is designed to address emerging concerns, such as the potential for EV battery damage leading to write-offs and the challenges posed by Chinese brands in providing adequate spare parts and repair support. This is particularly relevant as some Chinese cars have previously been reported as being almost uninsurable due to parts and repair support issues.
However, the car industry’s reaction has been mixed. Mike Hawes, SMMT Chief Executive, commented that a more precise assessment of vehicle insurability could benefit consumers by potentially lowering premiums. But he also noted that manufacturers have not yet received a complete understanding of how the scores will be calculated. Given the three-to-five-year development cycle for new vehicles, and the 18-month implementation timeframe, manufacturers would have preferred more time to ensure models could be engineered to align with the new ratings.
The new VRR insurance ratings explained
Each of the five risk categories will generate a Vehicle Risk Rating (VRR) from 1 to 100, with a higher number indicating a greater level of risk. A major addition is the ‘repairability’ category, analyzing the availability of “a transparent and accessible repair strategy”, according to industry sources.
Unlike the existing car insurance group ratings, which are fixed at a vehicle’s launch, VRRs will be dynamic. They can adapt to the changing risk profile of a vehicle as its development evolves.
Jonathan Hewett, chief executive at Thatcham, explained that insurers previously relied on historical data and driver information to determine premiums. “This is no longer viable in today’s fast-paced environment where it’s important to understand the influence of rapidly developing ADAS on accident frequency and severity, the impact of new security technology in staying ahead of the criminal gangs and the challenges electrification and new vehicle structures present to sustainable repair.”
A Thatcham spokesman highlighted the benefits for consumers, stating that the VRR system will bring insurance in line with other consumer products. “Cars on sale after 1 August will have an overall figure, and vehicle manufacturers will be able to break that down into five pillars and showcase performance in those areas,” he said. “It’s up to the car manufacturers to make that data accessible, and we’re working with them on that.”
Within the next two years, this system is expected to be adopted across all insurance and related systems. These systems will incorporate the five VRR assessments, enabling policies and premiums that consider a broader range of vehicle characteristics. Thatcham emphasized that the two-digit VRR numbers should not be compared to the old insurance group rating numbers. The plan is to see the five ‘pillar’ scores respected by car manufacturers, the government, the insurers, and consumers.
What are the core five Vehicle Risk Rating assessments?
The five categories are:
- Performance: Evaluates vehicle characteristics like speed and acceleration.
- Damageability: Assesses how design and materials influence damage severity and repair costs.
- Repairability: Focuses on the ease and cost of repairs.
- Safety: Analyses active and passive safety systems including crash avoidance features.
- Security: Examines physical and digital security measures.
