2016 Star Ratings Home Emergency Cover Discussion paper

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2016 Star Ratings

Home Emergency Cover

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About this document

This document outlines the key developments and trends that will inform the criteria we use for the 2016 Star Ratings for Home Emergency Cover – and, based on these, sets out the areas where we would like to consult the industry as part of ensuring that our ratings process remains robust and transparent.

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Key developments and trends

The market

We have reviewed developments in the home emergency market, considering legislation and regulation, provider changes, and home emergency products and have concluded that there has been no significant changes.

Legislation and regulation

The FCA review into the sale of add-on insurance has changed our focus, as it is clear that the FCA intends to ban the ‘opt out’ sales process. Following our review of the ‘add-ons’ market, we have reviewed the current Star Rating criteria and are proposing to make a change based on the cancellation return given within the ‘cooling-off period’.

Providers

We have been collecting data on home emergency products for 3 years and can see that during this period of time the number of providers has increased by 13% however the total number of products available has increased by a greater percentage.

Home Emergency Cover 2012 2014 2015 % change (2012 to 2015)

No of Providers 146 138 165 13%

No of Products 224 237 323 44%

Average products per provider 1.5 1.7 1.9 28%

Products/propositions

We looked at the way in which providers' products and propositions are changing since the launch of our Home Emergency Star Rating.

In general there has been little change in the way that products are distributed, however it is noted that the only method which has increased during this time is ‘Standalone’.

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Key implications for the 2016 Ratings process

Product area weightings

The criteria have been split into the following areas in order to show the weightings for each within the Ratings:

Rating area

Star Rating Features 2014 No. of features 2014 % share of features 2015 No. of features 2015 % share of features 2016 No. of features 2016 % share of features Policy Cover 44 80% 37 77% 36 75% Policy Excesses/Terms 5 9% 5 10.5% 6 12.5% Claims Management/Conditions 5 9% 5 10.5% 5 10.5% Helpline Services 1 2% 1 2% 1 2% Total 54 100% 48 100% 48 100%

At each Star Rating review we consider market changes and the relevance of these factors. As you can see the statistics above demonstrate that we will only change the criteria should the need arise following market changes or amendments, or potential amendments in legislation.

What does good look like?

For 2016 we are introducing ‘Cooling Off Period Basis’ as an additional core criterion, all other core criteria remain the same.

Rating area Core criteria set for the following

Policy Cover

 Maximum Claims Limit per Year

 Central Heating Claims Limit (£)

 Boiler Breakdown Claims Limit (£)

 Plumbing and Drainage Claims Limit (£) Policy Excesses/Terms

 Initial Exclusion Period

 Boiler Breakdown Exclusion Period

 Excess Standard

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Areas for discussion

These are the areas where Defaqto would like to discuss their proposals, and receive any feedback that you might have.

Alternative Accommodation

We propose to remove the current criteria ‘Alternative Accommodation - Limit (£)’ and Alternative Accommodation – Limit (nights)’ and replace with one feature considering the maximum overall sum insured provided for alternative accommodation

Addition of ‘Cooling-Off Period – Basis’

We are proposing to add ‘Cooling Off Period – Basis’ as a Star Rating criterion to reflect the return of premium if the policy is cancelled within the cooling off period. This will also be a core criterion for 4 and 5 Star

Add-on Products

We would also welcome your feedback on the whether the FCA review into the sale of add-on products should have a greater influence on our Star Ratings in the future

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Appendix: Proposed 2016 criteria

Based on the above analysis, we propose including the following criteria in our assessment process for the 2016 Ratings (core criteria are in bold text; new criteria are highlighted in green).

Proposed criteria

 Initial Exclusion Period  Water Supply Pipe

 Maximum Claims Per Year  Water Supply Pipe – Type

 Maximum Claims Limit Per Year  Water Supply Pipe – Outbuildings

 Central Heating Cover  Electric Supply – Failure

 Central Heating – Claims Limit (£)  Electric Supply – Accidental Damage  Central Heating – Accidental Damage  Gas Supply – Failure

 Radiators  Gas Supply – Pipe Limit

 Boiler Breakdown  Home Security Cover

 Boiler Breakdown – Claims Limit (£)  Accidental Damage – External Windows

 Boiler – Maximum Age  Keys – Loss

 Boiler Breakdown – Exclusion Period  Keys – Theft

 Annual Boiler Service  Roof Cover

 Plumbing & Drainage Cover  Vermin Removal  Plumbing & Drainage – Claims Limit (£)  Uninhabitable Period

 Plumbing – External  Alternative Accommodation – Maximum Limit (£)

 Internal Damage Clause  Alternative Supply

 Hot Water Pipes  Unoccupancy Period

 Cold Water Pipes  Emergency Claims Helpline

 Overflow Pipes  Claims Reporting Period

 Frozen Pipes  Approved Tradesmen

 Water Storage Tank  Response Time Guarantee

 Tap – Repairs  Repairs Guarantee

 Toilet Unit – Failure  Excess – Standard (£)

 Drainage System  Cooling off Period Basis

The table below sets out the 2015 criteria that we are planning to remove for 2016.

Criteria planned for removal