The End of Insurance Groups: A New Era of Car Insurance

Published 1 November 2024

The UK car insurance landscape is undergoing a significant shift. The traditional system of car insurance groups, which categorised vehicles based on risk and influenced premiums for decades, is being phased out in favour of a new, more nuanced approach: Vehicle Risk Ratings (VRRs). This change promises greater transparency, fairness, and potentially lower costs for UK motorists.

Understanding the Old System

Before we delve into the new system, let’s briefly recap the old one. Car insurance groups, numbered from 1 to 50, were assigned to vehicles based on factors such as:

• Vehicle cost: Higher-priced cars often fell into higher insurance groups.
• Engine power: Powerful engines were associated with higher risk and thus higher groups.
• Security features: Cars with advanced security systems could be placed in lower groups.
• Repair costs: Expensive repairs pushed vehicles into higher groups.

While this system provided a straightforward way to categorise vehicles, it had limitations. It often struggled to reflect the evolving nature of modern cars, particularly those with advanced safety features and alternative powertrains.

The Rise of Vehicle Risk Ratings

The new Vehicle Risk Rating system, developed by Thatcham Research, aims to address the shortcomings of the old system. It takes a more holistic approach, considering a wider range of factors:

• Performance: Includes acceleration, top speed, engine power, and the impact of electric and hybrid drivetrains.
• Damageability: Assesses how easily a vehicle is damaged in an accident and the cost of repairs.
• Repairability: Considers the availability of parts and repair complexity, encouraging manufacturers to design cars with simpler, more affordable repairs.
• Safety: Evaluates a vehicle’s active safety features, such as autonomous emergency braking and lane-keeping assist.
• Security: Assesses security features, including alarms, immobilisers, and tracking systems.

VRRs are assigned to vehicles on a scale of 1 to 99, with lower numbers indicating lower risk and potentially lower insurance premiums. This system is designed to be more adaptable to evolving technologies and driving behaviours.

Why the Change?

The move to VRRs is driven by several factors:

• Accuracy: VRRs provide a more accurate assessment of a vehicle’s risk profile, considering a wider range of factors.
• Fairness: The system ensures that drivers are charged premiums that reflect the true risk associated with their vehicle.
• Innovation: By rewarding safer and more repairable vehicles, VRRs incentivise manufacturers to develop consumer-friendly technologies.
• Transparency: VRRs provide a clearer understanding of how a vehicle’s insurance rating is determined.

What Does This Mean for You?

The transition to VRRs will be gradual. As more vehicles are assessed under the new system, you may start to see changes in your insurance premiums. If you’re in the market for a new car, consider the VRR when making your decision—lower VRRs could mean lower insurance costs over time.

In conclusion, the phasing out of insurance groups marks a significant step forward for the UK car insurance market. VRRs offer a more accurate, fair, and transparent approach to assessing vehicle risk, ultimately benefiting both drivers and insurers.