How does the new risk rating system affect car insurance costs?
The introduction of a new Vehicle Risk Rating system (VRR) in the UK reshapes the way car insurance premiums are calculated.
The new risk rating system replaces the outdated Group Rating System that had been in use for over 25 years.
The updated model now considers modern automotive technology when determining insurance costs.
Thatcham Research is the firm responsible for the system. It notes that features like collision alerts, automatic braking, and lane-keeping functions are now factored into risk assessments.
These innovations significantly enhance driver safety and reduce the likelihood of accidents and insurance claims.
This could lead to reduced premiums for drivers of newer vehicles equipped with such technologies.
For example, data from Thatcham’s testing found that rear-end crashes decreased by up to 50% when automatic braking technology was engaged.
However, there is a catch: the new rating system only applies to cars manufactured after 2024. This means that car owners with older models may not see any immediate benefits.
Do you need to upgrade your car to benefit?
While the new risk rating system promises potential savings, it mainly benefits drivers of newer cars with advanced safety features.
Older cars that lack these technologies will continue to be classified under older risk assessments.
In practice, this means that drivers may need to upgrade their vehicles to take advantage of lower premiums and buy an entirely new car.
The cost of purchasing a new car is significant, though. For instance, the UK’s cheapest new car, the Dacia Sandero, starts at £13,795.
Alternatively, drivers would have to wait for second-hand 2024 models to become available at lower prices.
Despite these upfront costs, the savings on annual insurance premiums could eventually offset the expense of upgrading to a more modern vehicle.
How does the UK system compare to the USA?
The new risk rating system in the UK could provide insight into potential changes for car insurance pricing models in the United States.
The US does not have a national rating system as advanced as the UK’s VRR. Their insurance industry still heavily relies on traditional factors such as driver’s age, driving history and location.
However, insurers are increasingly looking at vehicle technology when determining premiums. Features like driver assistance software already influence insurance rates in states with higher vehicle tech adoption.
As the automotive landscape continues to evolve, the US may soon follow the UK’s lead and implement more sophisticated risk rating systems that account for technological advancements.
In both countries, the shift toward technology-driven pricing models could change how drivers shop for both cars and car insurance.