Understanding the New Vehicle Risk Rating System: How It Affects Your Car Insurance Premiums

Most Drivers (Unless you’re particularly lucky) will be aware of insurance group ratings, this system, which groups cars from 1-50 was established by the Association of British Insurers (ABI) in partnership with Thatcham Research.

If you’re unfamiliar here’s how it worked:
- Cars are rated from 1-50 where group 1 represents the lowest risk and 50 the highest.
- These ratings assisted insurers to determine the risk associated with each vehicle model, the higher the group the higher the premium.
Vehicles were placed into these groups depending on several different factors:
-Performance; High performance cars (High BHP, Top Speed etc) are more likely to be in a higher group as they’re seen as potentially more likely to have an accident.
-Repair Cost: vehicles with expensive or difficult to repair parts fall into higher groups.
-Security features: cars with better security such as immobilizers or alarms, are less likely to be stolen and would then be placed into a lower group.
-Safety; cars with good crash test results or advanced safety features such as automatic braking, could be placed into lower groups.
- New car price: generally, the more expensive the car was to buy the more expensive it will be to insure, so it’ll be placed into a higher group.

The 1-50 system is relatively straightforward, once a models insurance rating was assigned, insurers will combine this with other factors including drivers age, location, driving history and annual mileage to calculate their individual premium.

Whilst this system has served well for a long time, In recent years it has faced criticism as car technology has evolved;
- Technological advances: the 1-50 system doesn’t fully capture the growing complexity of new car technology, particularly with the rise of electric vehicles, autonomous systems and advanced driver assistance systems (ADAS).
- Limited Granularity: With a restriction of 50 groups, there isn’t enough nuance to differentiate between two very different cars placed within the same group, particularly as features like in-car security, ADAS and Performance have become more varied.
- Lack of transparency: Consumers have reportedly found the 1-50 system rather opaque, as it doesn’t fully explain as to why certain cars are placed in their particular group.

The new Vehicle Risk Rating (VRR) system, introduced by Thatcham Research, aims to replace this 1-50 group rating by offering more detailed insights into vehicle risks, reflecting the more advanced technology in modern cars. The aim of the VRR system is to give both insurers and car buyers alike a more insightful look into the individual car, influencing both premiums and purchase decisions.

The introduction of VRR may have some car buyers confused, so how does it work?

The new VRR system has a greater rating scale of 1-50 replacing the previous 1-50 scale, this scale takes into account 5 major risk factors:
Performance: Risks associated with how the car drives and how likely it is to be involved in an accident.
Damageability: How easily the car can be damaged, either through an accident or through daily wear and tear.
Reparability: Cost and complexity of repairs, especially with the increasing prevalence of high-tech components like ADAS sensors.
Safety: Focus on crash protection and active safety systems, including emergency braking and lane keeping technology.
Security: the likelihood of theft, including the new risks posed by keyless entry systems and other modern threats.

The VRR system uses 1,300 data points from 25,000 cars to create a much more nuanced rating. This helps for insurers to set a more precise premium based on the specific risk associated with each vehicle. The system aims to provide total transparency to the consumer, helping you to understand why certain cars are more expensive to insure.

What does this mean for manufacturers? Or better yet consumers!

Car manufacturers can be incentivised by this system to design safer, more reparable cars that score better under the new system. The lower premium associated with lower risk rating creates a competitive edge for the manufacturers, something that will reflect on them well.
More importantly for the consumer this change in ratings will affect your premiums and purchasing decisions, insurance Is one of the many ongoing costs of owning a vehicle and by having a clearer picture of what that premium is going to look like can lead you to a better-informed decision next time you buy a car.

Not only does the new VRR system have an impact on consumers and manufacturers but it also has an impact on the environment. The industry has made its intent on moving to a more sustainable production clear and this system aligns with that plan. Vehicles with easy to repair parts or lower environmental impact in production may see more favourable ratings and therefore lower premiums.

Both systems have their merits. The old 1-50 group was simple and easy to understand, but the VRR offers more accuracy and really shines when it comes to modern technology. While some people might find the new system a bit tricky to get their heads around, it ultimately gives a fairer and more precise reflection of how safe or risky your car is.

In the end, it’s all about adaptation. As cars become more advanced, it’s only natural that the way we calculate insurance follows suit.
Insurers are preparing for a significant change in how they calculate car insurance premiums as the Vehicle Risk Rating (VRR) system gradually replaces the old 1-50 group system. But here’s the key thing to know: for the next 18 months, both systems will work side-by-side.

So, during this transitional period, insurers will likely rely on a combination of VRR data and the old 1-50 group system to set your premiums. After this, the VRR will become the main system.

How Will This Impact Your Premiums?

• More Precise Risk Calculation: Insurers will assess your car based on its modern technology, such as autonomous driving features, safety systems, and even environmental impact. If your car has advanced features, the VRR could help lower your premium by more accurately reflecting the reduced risk of accidents.
• Two Systems in Play: While both systems are active, your premium might reflect a mix of traditional factors (like engine size and repair costs) and new data points under the VRR (like ADAS and electric vehicle risks).
What Should You Do?
• Check Your Premiums: As your insurer adjusts to using both systems, your current premium might fluctuate—especially during renewals. It’s a good idea to reach out to your provider and ask how the VRR might impact your next premium or renewal.
• Keep an Eye on Updates: As we approach the end of the 18-month transition period, the full integration of VRR might bring more significant changes to how your car is rated. Insurers will likely adjust their pricing models, so staying informed could save you money.

This is a great opportunity for drivers to explore how these changes will affect them and potentially take advantage of new savings based on more accurate risk assessments.

As car insurance continues to evolve, systems like the Vehicle Risk Rating (VRR) are just the beginning of a more data-driven approach to assessing risk. With vehicle technology advancing rapidly, insurers will increasingly rely on these tools to help keep up with innovations like autonomous driving and AI-powered safety features.

For drivers, this means a shift in how insurance premiums are calculated and the factors that go into making those decisions. Will this new system offer a fairer, more accurate reflection of your car’s risk? And more importantly, as you consider your next vehicle, will you pay closer attention to these new ratings before making a purchase?

We’re curious—do you think the VRR system will change the way you approach car insurance? Is this the fairest method yet for calculating risk, or do you prefer the simplicity of the older systems? Let us know what you think!