Thatcham Research Launches New Vehicle Risk Rating System
Thatcham Research has introduced a new Vehicle Risk Rating (VRR) system, designed to enhance the accuracy of how vehicles are assessed for insurance purposes. Developed in collaboration with the motor insurance industry, this new model represents a more dynamic approach than the longstanding group rating system it replaces.
The existing group rating model, managed by Thatcham Research for over two decades, has been a foundational element for understanding vehicle risk in the insurance process. This system provides crucial data relied upon by brokers, price comparison websites, and insurers. When combined with traditional driver-specific factors like claims history, it helps insurers calculate premiums.
However, the automotive industry is changing at a rapid pace. The rise of electric vehicles (EVs), advanced driver assistance systems (ADAS), and software-driven features have all significantly impacted the factors influencing risk. Consequently, Thatcham Research and its insurer members recognized the need to modernize their risk assessment methods.
The new VRR system leverages market performance data, collected in partnership with vehicle insurers, to consider dynamic factors such as technological advancements, an increasing emphasis on sustainable repair practices, and emerging theft trends. This, according to Thatcham, provides insurers with more detailed insights into a vehicle’s risk profile while aligning with its broader mission of promoting safe, secure, and sustainable mobility.
The new system’s risk assessment is based on five key categories:
- Performance: Assesses characteristics like speed and acceleration, alongside the impact of modern powertrains.
- Damageability: Evaluates how the design, materials, and construction of a vehicle affect repair costs and the severity of damage.
- Repairability: Focuses on the ease and expense of repairs, providing incentives for repair-friendly vehicle designs.
- Safety: Analyzes active and passive safety systems, including features designed to avoid collisions.
- Security: Examines both physical and digital security measures.
Each assessment is assigned a score between 1 and 99, offering insurers a more granular understanding of vehicle risks. This allows for the calculation of more accurate, individualized insurance premiums for consumers.
The development of the VRR system involved an 18-month study, working with member insurers and evaluating over 1,300 data points from 25,000 vehicle derivatives. Thatcham highlights that insurer data was critical in refining the model, ensuring the new system accurately reflects real-world ‘insurability’.
“New technology is challenging the existing motor insurance model, leading to an unprecedented shift in the balance of risk from the driver to the vehicle,” stated Jonathan Hewett, chief executive of Thatcham Research. “In response, we’ve collaborated closely with insurers and used cutting-edge data analysis to create a rating system that offers a more precise and detailed assessment of vehicle risks.”
“This will not only help insurers price premiums more accurately but also encourage manufacturers to consider insurance outcomes when designing vehicles and implementing technologies.”
He continued: “Until relatively recently, insurers could rely on their historical experience of vehicle types, combined with driver data, 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.
“In a technology driven world, research and vehicle focused assessments are vital to informing this process, enabling insurers and their partners to see the road ahead with absolute clarity and confidence.”
Richard Birch, vehicle risk rating panel chair and technical underwriting manager at Saga, added: “Vehicle design and technology has undergone a massive step change during my 27 years in the industry.
“From powertrains and performance to materials and joining techniques, safety systems and assisted driving technologies, today’s vehicle is a very different animal.
“Vehicle risk rating, with its enhanced scoring, informed by the five risk assessments, delivers a vastly more accurate assessment than the outgoing Group Rating system, on which insurers can rate and underwrite while providing transparency to manufacturers allowing them to design and build more insurable vehicles.”
Vehicle repairability is a significant factor in determining insurance risk and, therefore, the associated costs. A focus on efficient and cost-effective repairs, along with prompt return-to-service post-collision, is heavily considered in the VRR score. The emphasis on repairability in the VRR system is designed to encourage designs and technologies that facilitate straightforward and economical repairs.
According to a recent report from the Association of British Insurers (ABI), insurers paid out £2.9 billion in motor insurance claims, an 18% increase from the £2.5 billion paid in Q2 2023. Repair costs have increased by 28%, totaling £1.9 billion. Furthermore, Thatcham Research stated last year that EVs are roughly 25% more expensive to repair than their petrol counterparts and require 14% longer to fix.
“Repairability is increasingly vital in the modern automotive era,” Hewett added. “Without a keen focus on sustainable repair at the design stage and vehicle launch, where parts supply and readily available repair methods are key, the industry’s environmental endeavours are at risk of being undermined by vehicles that become disposable too early into their use phase.”
Today, September 24, Thatcham Research officially launched the VRR system. In an 18-month transition period, both the new VRR system and the existing Group Rating system will be in use. This will allow insurers and manufacturers to adjust before the VRR becomes the only reference point for vehicle risk assessment.
