Vehicle Risk Ratings: A New Era for Car Insurance
Big changes are coming to how your car insurance premiums are calculated. The traditional car insurance groups, which have been the standard for years, are being replaced by a new system called ‘Vehicle Risk Ratings.’
This transformation comes directly from Thatcham Research, the UK’s non-profit automotive risk intelligence organization. The Vehicle Risk Ratings system will apply to new vehicles, offering a more modern, nuanced approach to assessing insurance risk.
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This image represents a carpark which may contain vehicles of varied risk ratings.
What’s Changing and When?
It’s not an immediate, across-the-board overhaul. The new Vehicle Risk Ratings system is being phased in gradually. It applies only to new vehicles registered from August 1, 2024.
The existing insurance group system, which consists of 50 different groups, has been in place since 2009, although the origins of the system go back to the 1970s. Similar to previous insurance group updates, cars registered before the implementation of the Vehicle Risk Ratings will continue to be assessed under the old system for a transition period.
You’ll have a considerable adjustment period, as the Vehicle Risk Ratings and the traditional insurance groups will operate side-by-side for 18 months.
Understanding Vehicle Risk Ratings
So, what exactly are these new ‘Vehicle Risk Ratings’ based on?
The new system scores vehicles across five key areas:
- Performance: Evaluates a car’s power and speed. This includes factors like acceleration, top speed, list price, drivetrain impact, and power systems.
- Damageability: Assesses how prone a car is to damage and the cost of repairs. Considerations include vehicle design, materials used, construction techniques, and design.
- Repairability: This factor looks at how easy the car will be to fix. Cars will score well if a ‘transparent and readily available repair strategy’ is in place for the vehicle. The cost and availability of parts will also play a role. Uncommon cars using unique technology and parts are expected to receive higher risk ratings.
- Safety: Evaluates safety features, for example: crash avoidance systems and kerb weight.
- Security: Focuses on how well the car prevents theft and break-ins. This assessment uses data from Thatcham Research’s New Vehicle Security Assessment. Security factors include anti-theft and break-in prevention systems.
The Scoring System
The Vehicle Risk Ratings system assigns each of the five evaluation areas a score ranging from one to 99. A score of one represents the lowest risk and is typically associated with lower insurance costs, while 99 represents the highest risk and therefore higher insurance costs.
Thatcham Research states the scores use ‘real-world claims’ data. The result represents ‘a more advanced and dynamic’ assessment.
A significant advantage of the new system is that car manufacturers can make the ratings accessible. They will provide information on how the car performed in each of the five groups. This transparency will empower consumers to make more informed decisions.
The Rationale Behind the Change
Why is car insurance changing now? The automotive industry is rapidly evolving, with a wealth of new technology and intricate software integrated in recent years.
The old system is becoming outdated as new materials, processes, complex software and advanced technology play an increasingly important role in vehicle design. An updated system is necessary to properly assess the insurability of vehicles.
It’s also become necessary to consider cybersecurity, as increasing numbers of vehicles connect to the internet.
Impact on Consumers
If you are buying a car registered after August 1, 2024, you won’t need to make any changes to how you acquire car insurance. The process will remain the same, but the cost will be determined using the Vehicle Risk Rating system behind the scenes.
