New vehicle risk rating to help keep insurance costs low for fleets

Thatcham Research has launched an investigation new vehicle risk rating (VRR) system Improving the accuracy of vehicle insurability assessments.

Developed together with the motor insurance sector, new model It provides a more dynamic framework for assessing vehicle risks and improves on the long-standing group rating system.

Thatcham Research’s existing group rating model, which has been in place for over 25 years, provides vehicle insight into the underwriting process, creating the DNA of the vehicle being insured.

This basic information is taken as a basis by brokers, price comparison sites and insurers, and is then combined with traditional driver-specific considerations such as claims history to allow insurers to calculate premiums.

But as the automotive sector continues to rapidly transform with the rise of electric vehicles (EVs), advanced driver assistance systems (ADAS) and software-driven functions, Thatcham Research and its insurer members have recognised the need to modernise risk assessment.

The new vehicle risk rating system uses market performance data collected in partnership with vehicle insurers to account for dynamic factors such as advances in technology, a greater focus on sustainable repairs and emerging theft trends.

Thatcham says this provides insurers with more detailed information about vehicle risks, while also supporting its mission to advance safe, secure and sustainable mobility.

There are five ratings that provide a holistic view of each vehicle’s risk profile.

• Performance – Evaluates vehicle characteristics such as speed, acceleration and the impact of modern powertrains.
• Vulnerability – Evaluates how design, materials, and construction affect repair costs and damage severity.
• Repairability – Promotes repair-friendly vehicle designs by focusing on the ease and cost of repairs.
• Safety – Analyzes active and passive safety systems, including collision avoidance features.
• Security – Examines physical and digital security measures.

Each of these assessments is scored on a scale of 1 to 99 and provides insurers with a more detailed understanding of vehicle risks, enabling more accurate and personalized insurance premiums to be created for consumers.

The development of the new system involved 18 months of work with Thatcham Research member insurers, assessing more than 1,300 data points across 25,000 vehicle variants.

Thatcham says data from insurers played a key role in developing the model, ensuring the new system accurately reflects real-world ‘insurability’.

“New technology is challenging the current car insurance model and is causing an unprecedented shift in the balance of risk from driver to vehicle,” said Jonathan Hewett, CEO of Thatcham Research.

“In response, we have worked closely with insurers, using cutting-edge data analytics 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 will also encourage manufacturers to consider insurance outcomes when designing vehicles and implementing technologies.”

He continued: “Until relatively recently, insurers were able to rely on their past experience with vehicle types, combined with driver data, to set premiums.

“This is no longer feasible in today’s fast-paced environment. It is important to understand the impact of rapidly evolving ADAS on crash frequency and severity, the impact of new safety technology in staying ahead of criminal gangs, and the challenges posed by electrification and new vehicle structures for sustainable repair.

“In a technology-driven world, research and tool-driven assessments are vital to inform this process, ensuring insurers and their partners can see the path ahead with absolute clarity and confidence.”

Richard Birch, head of vehicle risk rating panel and technical underwriting at Saga, added: “Vehicle design and technology have changed dramatically in my 27 years in the industry.

“Today’s vehicles have a very different structure, from powertrains to performance, from materials to assembly techniques, from safety systems to assisted driving technologies.

“The improved scoring system, supported by five risk assessments, provides a much more accurate assessment compared to the old Group Rating system, which allowed insurers to rate and underwrite vehicles, enabling manufacturers to design and produce more insurable vehicles.”

A vehicle’s repairability (effective, cost-effective vehicle repairs and rapid return to service after a collision) greatly impacts insurance risk and therefore costs.

The significant weight of repairability assessment in the VRR score encourages vehicle designs and technologies that facilitate simple and economical repairs.

The The Association of British Insurers (ABI) recently reported: It was stated that insurers paid out a total of £2.9 billion in motor insurance claims, an 18% increase on the £2.5 billion paid in the second quarter of 2023.

Repair costs rose by 28% to £1.9 billion.

Thatcham Research also said last year that electric vehicles were around 25% more expensive to repair and took 14% longer to repair than their petrol counterparts.

“Repairability is becoming increasingly important in the modern automotive age,” Hewett added. “Without a strong 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 efforts risk being undermined by vehicles becoming disposable too early in their life cycle.”

Thatcham Research is officially launching its vehicle risk rating system today (Tuesday, September 24). This will be followed by an 18-month dual rating period where both the new VRR and the existing Group Rating system will apply.

This transition will allow insurers and manufacturers to make adjustments before the VRR becomes the sole reference for vehicle risk assessment.