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New Vehicle Risk Rating Model to Help Insurers Adapt to Emerging Vehicle Risks

Thatcham Research is introducing a new Vehicle Risk Rating (VRR) model designed to help insurers better manage the evolving risks posed by modern vehicles.

 

New Vehicle Risk Rating Model to Help Insurers Adapt to Emerging Vehicle Risks f
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This advanced model is designed to provide a more accurate and comprehensive assessment of vehicle risks, replacing the longstanding Group Rating system that has been in place for over 25 years. The VRR system will offer insurers dynamic, real-time data to keep pace with the rapidly evolving automotive landscape, driven by advancements in electric vehicles (EVs), safety technology, and changing security threats.

The traditional Group Rating system, based on a static scale of 1-50, has long been used by brokers, insurers, and price comparison websites to calculate vehicle premiums. However, the model’s fixed nature meant it could not adequately address the emerging risks posed by modern vehicles. As automotive technology has rapidly progressed, particularly with the rise of advanced driver assistance systems (ADAS), electric vehicles, and software-driven functions, the need for a more adaptive risk assessment model has become clear. Thatcham Research, in collaboration with the motor insurance industry, responded to this challenge by developing the VRR system.

The Vehicle Risk Rating model is built on five key assessments: performance, damageability, repairability, safety, and security. Each of these categories offers a detailed evaluation of different aspects of a vehicle’s risk profile. The “performance” assessment considers factors like speed, acceleration, and the influence of new powertrains, including electric motors. “Damageability” focuses on the vehicle’s design and materials, determining how vulnerable the car is to damage and how expensive repairs might be. “Repairability” looks at the ease and cost of repairing a vehicle, with an emphasis on creating repair-friendly designs. The “safety” assessment evaluates both active and passive safety systems, including crash-avoidance features, while “security” examines the vehicle’s physical and digital defenses against theft and other criminal activities.

Each assessment is scored on a scale of 1 to 99, allowing insurers to generate a much more detailed understanding of a vehicle’s risk profile. This scoring system will enable insurers to set premiums with greater precision while also providing vehicle manufacturers with clear insights into how their design choices influence insurability.

Thatcham’s new system introduces a dynamic element to vehicle risk assessments. Unlike the static ratings provided at vehicle launch under the old system, the VRR model will offer ongoing updates that reflect real-time changes in vehicle risk. This flexibility is especially important as vehicle technology evolves, ensuring that insurers can adapt quickly to new risks, such as the growing complexity of ADAS or the specific repair challenges posed by EVs.

The development of the VRR system was a collaborative effort involving an 18-month study that analyzed over 1,300 data points from 25,000 different vehicle models. This data-driven approach ensures that the new system is grounded in real-world information, providing a reliable foundation for assessing insurability.

One of the most significant innovations within the VRR model is the emphasis on repairability. With repair costs rising sharply—28% higher than in previous years, according to the Association of British Insurers (ABI)—and the complexity of EV repairs adding further strain on insurers, this category has become crucial. Thatcham’s new model aims to encourage manufacturers to prioritize designs that support efficient and sustainable repairs, thereby reducing insurance costs and environmental impact.

Thatcham Research officially launched the VRR system on September 24, 2024, and the industry will enter an 18-month dual-rating period where both the new VRR and the existing Group Rating systems will be applied. This transition phase will provide insurers and manufacturers with time to adjust before VRR becomes the sole standard for vehicle risk assessment.

Source: thatcham.org

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e2e Total Loss Vehicle Management [e2e] is the UK’s only salvage and automotive recycling network with nationwide, environmentally compliant sites delivering performance resilience and service reliability to the insurance and fleet markets.  The network’s online salvage auction www.salvagemarket.co.uk drives strong salvage resale values and faster sales.  e2e’s salvage clients have access to the network’s stocks of over 5 million quality graded, warranty assured reclaimed parts. 

The power of the network model means e2e has the ability to influence industry standards and is committed to continually raising the bar whilst redefining the role and perceived value of the salvage operator.  Network members adhere to robust service level agreements, against which they are audited, in order to ensure performance consistency and a market leading customer experience.  

The salvage and recycling operating environment is evolving rapidly, and e2e is anticipating, listening and responding to changing market needs.  Regulatory compliance, ESG, reclaimed parts, customer experience, EVs, new vehicle technologies, data and reputation risk are just some of many considerations linked to the procurement of salvage services.  e2e will drive further added value to clients and members through the adoption and application of emerging technologies, continuing to differentiate its proposition and position salvage services as a professional partnership. 

Owain Griffiths

Owain Griffiths

Head of Circular Economy at Volvo Cars

Owain joined Volvo Cars in June 2021 to lead Circular Economy in the Global Sustainability Team. The company has committed to being a circular business by 2040 and has financial, recycled content and CO2 based targets for 2025, all of which Owain is working across the company to make happen. Owain previously worked for circular economy consultancy Oakdene Hollins where he advised businesses on evidence led circular economy implementation. 

Turning into a circular business and the importance of vehicle reuse and recycling.

The presentation will cover the work Volvo Cars is doing to achieve 2025 but mainly focus on the transformational work towards 2040 and the business and value chain changes being considered. Attention will be paid to the way vehicles are being dealt with at the end of life and the complexities of closing material and component loops. Opportunities and challenges which Volvo Cars is facing will be presented including engagement with 3rd parties and increasing pressure from stakeholders.

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