2015 Star Ratings Commercial Vehicle Insurance Discussion paper

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2015 Star Ratings

Commercial Vehicle Insurance

About this document

This document outlines the key developments and trends that will inform the criteria we use for the 2015 Star Ratings for Commercial Vehicle Insurance – 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 Commercial Vehicle insurance market, considering legislation and regulation, provider changes, and Commercial Vehicle products and and propose the following changes to our Ratings for 2015:

 The FCA investigation into the sale of add-on insurance is likely to change the focus of the relative importance of these policy add-ons; we intend to reduce the amount of emphasis placed on the availability of the add-on products in our Ratings

Legislation and regulation

FCA Review into policy ‘add-ons’

The major development in this area at present is the FCA investigation on the sale of 'add-ons’ and consider the provision of two of the major add-ons to Commercial Vehicle insurance, Uninsured Loss Recovery and Breakdown cover.

 Over the past five years the availability and way in which providers offer uninsured loss recovery cover has remained static

 We believe that the important question with uninsured loss recovery is whether cover is available, irrespective of it being included as standard or as an optional extra, as this is usually simply an issue of cost

 We believe that the importance lies with the indemnity limit provided rather than the availability. We intend to include criteria for uninsured loss recovery cover within the 2015 Star Rating based on this factor, and remove whether this is available as standard or as an optional extra, thus focusing on the cover rather than the element of cost

Cover not provided Cover is optional Cover is standard 51% 25% 25% 54% 27% 20%

Uninsured loss recovery cover 2009-2014 (% of policies)

We also looked at the change in the provision of breakdown cover over the past five years:

 During this period the availability of UK Breakdown cover has been fairly consistent, with only a slight change in those offering cover as standard or an optional extra

 We intend to score as ‘availability of cover’ based on whether both EU and UK cover is available or just EU or UK only

Providers

We reviewed how the make-up of distribution has changed over recent years, comparing 2014 to 2009:  Total distributor numbers has not seen a significant change over the period, with 61 distributor brands

today compared to 56 in 2009.

 In summary, we cannot detect any marked change in the overall types and quality of cover being offered, so feel no need to change our Star Rating criteria on this account

Products/propositions

We looked at the way in which providers' products and propositions are changing over time:

 It is noted that a number of providers now include an element of protection following an incident with an uninsured driver and consider this worthy of inclusion in the 2015 Ratings

Cover not provided Cover is optional Cover is standard 54% 36% 10% 66% 30% 4% UK Breakdown Cover 2011-2014 (% of policies)

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Key implications for the 2015 Ratings process

Product area weightings

The criteria have been split into the following product features in order to show the product area weightings for each of the Commercial Vehicle Insurance Star Ratings:

2014 no. of features 2014 % share of features 2015 no. of features 2015 % share Policy Cover 16 41 16 44

Accident Management Services 10 26 9 25

Policy Excesses/Terms 7 18 7 19

Policy Add ons 4 10 2 6

Helpline Services 2 5 2 6

Total 39 100 36 100

We will continue with Star Rating for Commercial Vehicle Insurance which places most of its emphasis on the policy cover provided and accident management services, which accounts for just over two thirds of the criteria used within the Star Ratings.

What does good look like?

For 2015 we have amended the core criteria for 4 or 5 Star products from those which are currently being applied in respect of European Cover.

Rating Area Core criteria set for the following

Policy Cover  Windscreen Limit

 Theft of Keys Limit (£)  European Cover Limit

Accident Management Services  Vehicle Rescue Cover  Accident Transport

Policy Excesses/Terms  Repairs Guarantee – Period

Areas for discussion

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

Changing the DNA scoring method for add-on features to reflect only the quality of the add-on, rather than the price bundling of the feature

 Driven by our view of the likely market changes as a result of the FCA review into the sale of 'add-ons'. This will lead us to remove the ‘ULR cover’ as a criterion from the 2015 Star Rating criteria

 Amendment of criteria for EU and UK Breakdown with a move away from scoring ‘optional’ and ‘standard’ as a DNA score of 3 and 5, and consideration only to the availability of cover. Therefore if cover is available for both EU and UK a DNA score of 5 applies, for products that offer EU or UK only a DNA score of 3 will be given

Reflect on the cover and limits, rather than the availability of cover

 We are also proposing to remove how certain cover features are provided and only relect on the cover basis and limit provided. This will lead us to remove ‘no claims discount protection’ and ‘full European cover’ as criteria for 2015

 We have also decided to remove ‘transport – maximum passengers’ as this depends on the vehicle type and limit to the numner of passengers it can carry. We therefore feel it is no longer appropriate to include as a Star Rating criterion

Other changes to product features studied

 We carried out a major review of our DNA scores for 2014, and haven't seen any dramatic market changes, this said there are criteria which we are considering amending at this review for 2015 Ratings

 With focus moving to level of cover rather than the way in which this is provided, we intend to remove the criteria ‘Full EU cover’ and replace with ‘EU Cover Limit’

 We have also reviewed the ‘weighting’ of the 2014 Ratings considering whether there is an element of ‘double counting’ and intend to remove ‘Transport – Maximum Passengers’ from the 2015 Ratings

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Appendix: Proposed 2015 criteria

Based on the above analysis, we propose including the following criteria in our assessment process for the 2015 Ratings (core criteria are in bold text; new criteria are highlighted in green).

Proposed criteria

 Third Party Property  Windscreen Excess – Replacement

 New Vehicle Period  Windscreen Excess – Repair

 New Vehicle (%)  Driver Under 21 Excess

 New Vehicle Additional Sum  Driver 21-24 Excess

 Windscreen Limit  Inexperienced Driver Excess

 Windscreen Limit Non-Approved Repairer  Vehicle Rescue Cover  Audio Limit – Manufacturer  Accident Transport

 Sat. Nav. Limit – Manufacturer  Emergency Accommodation (£)

 Personal effects  Recommended Repairers

 Loss of Keys  Class of Courtesy Vehicle

 Theft of Keys  Courtesy Vehicle Period

 Trailer Cover  Total Loss Courtesy Vehicle

 Hire or Reward  Total Loss Vehicle Period

 European Cover Limit  Repairs Guarantee – Period

 Year 1 Cancellation  Legal Helpline

 Year 2 Cancellation  Emergency 24 Hour Helpline

 NCD Protection Claims  Uninsured Loss Recovery - Limit  Uninsured Driver Benefit  Breakdown Cover (availability)

The table below sets out the 2014 criteria that we are planning to remove for 2015.

Criteria planned for removal

 Full European Cover  Uninsured Loss Recovery Cover

 NCD Protection  Breakdown Cover (UK)