2015 Star Ratings Boiler Breakdown Cover Discussion paper Defaqto Limited 2014. All rights reserved. No parts of this publication may be reproduced in any form by any means, whether electronic, mechanical, optical or any other or be stored in a retrieval system without the express written permission of the publisher. The publisher has taken all reasonable measures to ensure the accuracy of the information and Ratings in this document and cannot accept responsibility or liability for errors in or omission from any information given and for any consequences arising.
About this document This document outlines the key developments and trends that will inform the criteria we use for the 2015 Star Ratings for Boiler Breakdown 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. 2
Key developments and trends The market We have reviewed developments in the boiler breakdown insurance market, considering legislation and regulation, provider changes, boiler breakdown insurance products and have concluded that there have been no significant changes. Therefore, we believe that the current Star Ratings and criteria remain valid and we do not need to change our approach for the 2015 Star Ratings. Legislation and regulation FCA Review into policy add-ons The FCA investigation into the sale of add-on insurance in respect of home emergency cover is in our opinion unlikely to result in changes to the product cover. We believe the focus is on the way that the product is sold, making it easier for the consumer to compare cover thus increasing competition and making the product more accessible. Providers We have been collecting data for boiler breakdown insurance products since 2012 and to date have not been able to identify noticeable trends within this market. The number of providers has reduced by 13% The average number of products per provider has increased by a quarter giving an overall increase in the number of products available of 10% 2012 2014 % change No. of Providers 24 21-13 No. of Products 51 56 10 Average Products per provider 2.1 2.7 25 3
Products/propositions We looked at the way in which providers' products and propositions are changing since the launch of our Home Emergency Cover Star Rating. Boiler breakdown is no longer offered as a home insurance add-on Utility providers have increased their share in the market by 20% Product Distribution 2012-2014 (% of policies) 61% 73% 37% 27% Standalone - Home Emergency Standalone - Utility Provider 2012 2014 2% 0% Add on - Home Insurance 4
Key implications for the 2015 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 2014 no. of features 2014 % share of features 2015 no. of features 2015 % share Policy Cover 18 72 16 70 Policy Excesses/Terms 3 12 4 13 Claims Management/Conditions 3 12 3 13 Helpline Services 1 4 1 4 Total 25 100 23 100 We will continue with Star Rating for home emergency cover which places most of its emphasis on the policy cover provided, which accounts for over two thirds of the criteria used within the Star Ratings. What does good look like? For 2015 we see no need to change the core criteria for 4 or 5 Star products from those which are currently being applied. Rating area Core criteria set for the following Policy Cover Policy Excesses/Terms Maximum Replacement Costs Annual Boiler Service Initial Exclusion Period 5
Areas for discussion These are the areas where Defaqto would like to discuss their proposals, and receive any feedback that you might have. Removal of criterion Following a thorough review of the market we propose to remove two criteria for the 2015 Star Ratings: the criteria are concerned with the limit provided for parts ( ) and for Labour time in hours. Our review of our data shows, in the table below, the percentage of providers that do not specifically state the maximum parts or labour limit. It is difficult for us to DNA score the features fairly and we are proposing to remove these criteria which will result in more emphasis on the overall claims limit for each element of cover Criteria % of products that do not state a limit Boiler Breakdown Part Costs ( ) 77% Boiler Breakdown Labour Time (Hours) 77% No 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 that would require us to reconduct this review for 2015 Ratings There are no obvious elements of policy cover that might emerge over the next 16 months We cannot see any reason to remove any of the existing elements of cover from our Ratings because of market changes likely to happen in the next 16 months 6
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). Proposed criteria Initial Exclusion Period Replacement Costs Period Maximum Claims Per Year Initial Boiler Inspection Maximum Claims Limit Per Year Annual Boiler Service Central Heating Cover Uninhabitable Period Central Heating Accidental Damage Alternative Accommodation Limit ( ) Boiler Breakdown Claims Limit ( ) Alternative Supply Boiler Maximum Age Unoccupancy Period Boiler Maximum Output (kw) Emergency Claims Helpline Electric Boilers Approved Tradesmen Boiler Breakdown Scale/Debris Exclusion Response Time Guarantee Boiler Breakdown Flues Exclusion Repairs Guarantee Maximum Boiler Replacement Costs The table sets out the 2014 criterion that we are planning to remove for 2015. Criteria planned for removal Boiler Breakdown Part Costs ( ) Boiler Breakdown Labour Time (Hours) 7