Motor insurers have moved to a brand new Automobile Threat Ranking (VRR) system to find out the value of premiums for drivers primarily based on the automobile they drive.
It has changed the insurance coverage group score system – rising from group 1 to 50 – which beforehand decided the chance stage of autos primarily based on the automobile’s unique worth, price of substitute components and its efficiency, together with energy, acceleration time and prime pace.
The physique that has created VRR says this new system ought to present a ‘extra complete and dynamic framework’ to permit insurers to extra pretty calculate premiums primarily based on danger as a result of by making an allowance for components such because the variety of superior security programs put in in fashions, sustainability of repairs and theft traits.
Nonetheless, specialists have instructed That is Cash the brand new system may sends the price to cowl EVs hovering…
Motor insurance coverage suppliers have began to make use of a brand new Automobile Threat Ranking system to calculate the price of premiums primarily based on the automobile you drive. This is the way it works and why EV homeowners may get stung by the brand new format
What’s the Automobile Threat Ranking system?
The brand new VRR system has been launched by automotive danger intelligence specialist, Thatcham Analysis, which is funded by the insurance coverage sector.
It says it’s going to ‘enhance the accuracy of car insurability assessments’ by making an allowance for a better depth of details about fashions, particularly across the developments in security tech put in within the newest automobiles.
Thatcham instructed us: ‘The brand new Automobile Threat Ranking system makes use of market efficiency information, collected in collaboration with car insurers, to account for dynamic components similar to developments in know-how, an elevated concentrate on sustainable restore, and rising theft traits.Â
‘This provides insurers extra granular insights into car dangers whereas supporting the Thatcham Analysis mission to boost protected, safe, and sustainable mobility.’Â
How does it calculate the chance of your automobile?
The brand new score system assesses danger primarily based on 5 totally different parameters:Â
1. Efficiency
The primary parts taken into consideration is the efficiency of your car, This contains evaluating the car’s prime pace, 0-to-62mph acceleration and the technological stage of the engine itself.
2. Damageability
Every car is reviewed for the way the design, supplies, and development affect restore prices and harm severity.
3. Repairability
This focuses on the convenience and value of repairs, encouraging repair-friendly car designs. Of the 5 parameters, that is weighted highest by insurers.
4. Security
Analyses lively and passive security programs, together with crash avoidance options.
5. Safety
Examines bodily and digital safety measures, leveraging Thatcham Analysis’s New Automobile Safety Evaluation experience.
Every mannequin can be given a scaled rating of 1 to 99 for the 5 totally different danger parameters. These are: efficiency; damagability; repairability; security; and safety
In complete, some 1,300 totally different information factors are assessed for every mannequin.Â
The 5 evaluation parameters will obtain a rating on a scale of 1 to 99 to supply insurers with a ‘extra granular understanding’ of car danger and enabling ‘extra correct, individualised insurance coverage premiums for shoppers’.Â
Jonathan Hewett, chief govt at Thatcham Analysis, instructed That is Cash: ‘New know-how is difficult the present motor insurance coverage mannequin, prompting an unprecedented shift within the steadiness of danger from the driving force to the car.Â
‘In response, we have labored carefully with insurers, drawing upon cutting-edge information evaluation to create a score system that gives a extra exact and detailed evaluation of car dangers.’
He added: ‘VRR is not going to solely assist insurers value premiums extra precisely but in addition encourage producers to contemplate insurance coverage outcomes when designing autos and implementing applied sciences.’
Will it retrospectively rating older fashions?
The corporate says it has been engaged on the method to energy VRR for 18 months utilizing a devoted group.
Nonetheless, it has up to now solely assessed 9 autos in complete and it’ll not retrospectively be offering VRR scores for older fashions.
Any car bought earlier than 1 August will as an alternative retain its unique group score (1-50) and its danger judged by insurers primarily based on this score. The group score system dates again to the Seventies.
It means motorists will solely profit from this fairer system in the event that they purchase a model new motor. Â
When will insurers begin utilizing this new Automobile Threat Ranking system?
VRR was formally launched on 24 September.
Nonetheless, for the primary 18 months, insurers can be utilizing it alongside the present Group Ranking System to calculate premiums.
That is to permit each motor insurance coverage suppliers and automobile producers to regulate earlier than VRR turns into the only real reference for car danger evaluation.Â
The newest information from the ABI exhibits that motor premiums have began to fall having reached file excessive ranges on the finish of final yr. Nonetheless, the typical price of canopy remains to be up 48% in two yearsÂ
Specialists warn VRR can be unhealthy information for EV homeowners
Of the 5 parameters being assessed to measure danger for every car, ‘repairability’ is the one that’s most vital as a result of will probably be weighted highest by insurance coverage suppliers.
It is because restore prices for insurers have risen by 28 per cent within the final yr alone and is the driving pressure for why premiums have reached file excessive ranges over the earlier 12 months.Â
In accordance with the Affiliation of British Insurers (ABI), suppliers have paid out £2.9billion in motor insurance coverage claims within the second quarter of 2024. That is 18 per cent greater than the £2.5bn paid out between April and June in 2023.Â
‘Repairability is more and more vital,’ stated Hewett.Â
‘With no eager concentrate on sustainable restore on the design stage and car launch… the trade’s environmental endeavours are vulnerable to being undermined by autos that grow to be disposable too early into their use part.’
Nonetheless, that is significantly unhealthy information for EV homeowners.
The excessive price of repairing EVs may work towards homeowners of electrical automobiles as insurers are anticipated to weigh the repairability score extremely when calculating premium costs, Auto Specific instructed usÂ
Thatcham Analysis acknowledged final yr that electrical autos are roughly 25 per cent dearer to restore than their petrol equivalents and take 14 per cent longer to repair.
Chris Rosamond, present affairs and options editor at Auto Specific, completely instructed That is Cash: ‘Beforehand, automobile insurance coverage was primarily based on the extra generic 1-50 group score system, however components similar to an inflow of Chinese language EVs with inadequate spare components back-up and an absence of vital restore data, or the introduction of expensive-to-fix tech similar to LED headlamps or driver-assistance programs, had been making it more and more onerous for insurers to evaluate danger precisely.Â
‘In consequence, premiums have skyrocketed – and we’re all paying for this data hole.’
However whereas the brand new system guarantees better transparency, it’s going to inevitably result in comparatively greater insurance coverage premiums for autos with excessive damageability or poor repairability scores.
‘VRR may negatively affect EVs if the issue of repairing EV batteries pushes scores up, as a result of we are going to begin to see elevated premiums for fashions affected,’ Rosamond added.
He says that whereas, within the quick time period, this doubtlessly creates yet one more barrier for motorists seeking to make the transition to an EV, the brand new highlight on repairability will inevitably pressure automobile producers to enhance.
‘VRR is a extra complete – and far fairer – evaluation of autos, which is nice information for shoppers,’ he went on.Â
‘It highlights weaknesses in a manner the trade has not seen earlier than and can pressure producers – together with any new manufacturers from China or elsewhere wishing to launch merchandise right here – to extra carefully take into account repairability when designing new automobiles for UK roads.’
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