2015 Star Ratings Motorbike Insurance 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 Motorbike 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. 2
Key developments and trends The market We have reviewed developments in the Motorbike Insurance market, considering legislation and regulation, provider changes, and Motorbike Insurance products 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 The major development in this area at present is the FCA investigation on the sale of 'add-ons and we have considered the provision of three of the major add-ons to Motorbike Insurance: Uninsured Loss Recovery, Breakdown Cover and Helmet and Clothing Cover. Over the past five years the number of providers who do not offer uninsured loss recovery cover has decreased slightly and more providers are now including cover as standard Uninsured loss recovery 2009-2014 (% of policies) 38% 30% 42% 46% 27% 15% Cover not provided Cover optional 2014 2009 Cover standard 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 3
We considered 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 as an optional extra UK Breakdown Cover 2009-2014 (% of policies) 39% 42% 42% 46% 18% 12% Cover not provided Cover optional Cover standard 2014 2009 We intend to score as availability of cover based on whether both EU and UK cover is available or just EU or UK only We also looked at the change in the provision of helmet and clothing cover over the past five years: The number of providers who do not offer helmet and clothing cover has decreased significantly and more providers are including cover as standard Availability of helmet and clothing cover 2009-2014 (% of policies) 58% 48% 36% 38% 15% Cover not provided Optional 2014 2009 Standard 4% Cover does still remain more likely to be offered as an optional extra We believe that the important question with helmet and clothing 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 cover limit provided rather than the availability. We intend to include criteria for helmet and clothing cover within the 2015 Star Rating based on this 4
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 Providers We reviewed how the make-up of distribution has changed over recent years, comparing 2014 to 2009: Total distributor numbers have increased by 16% over the period, with 29 distributor brands today compared to 26 in 2009 Five providers no longer offer motorcycle insurance, with nine providers entering the market in this time 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 small number of providers have increased the number of products available to offer differing levels of cover or to target differing markets. None of these is yet sufficient for us to amend our Star Ratings criteria for 2015 5
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 No. of Features (2014) 2014 % Share of Features No. of Features (2015) 2015 % Share Policy Cover 11 35.5% 11 41% Accident Management Services 2 6.5% 2 7% Policy Cover Availability 2 6.5% 1 4% Policy Excesses/Terms 8 26% 8 30% Policy Add Ons 6 19% 3 11% Helpline Services 2 6.5% 2 7% Total 31 100% 27 100% We will continue to place most of the emphasis on the policy cover provided and accident management services, which account for just under half of the criteria used. What does good look like? For 2015 we see no need to change the core criteria for 4 or 5 Star rated products from those which are currently being applied. Rating Area Core criteria set for the following Policy Cover NCD Protection Repairs Guarantee Policy Add ons Helmet and Clothing Cover Limit ( ) Accident Management Services Helpline Services Bike Rescue Cover 24 Hour Claims Line 6
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 features to reflect only the quality, 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 features Uninsured Loss Recovery cover and Helmet and Clothing cover 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 reflect on the cover and limit provided. This will lead us to remove personal accident cover as a criterion for 2015 No other changes to product features studied We carried out a major review of our DNA scores for 2014, and have not 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 7
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 Year 1 Cancellation Annual Foreign Use Limit Year 2 Cancellation 24 Hour Claims Line Suspension of Cover Legal Advice Helpline New Bike Damage Bike Rescue Cover New Bike Period Bike Rescue Cover Basis Helmet and Clothing Limit Accident Transport Loss of Keys Rider Under 21 Excess Theft of Keys Rider 21-24 Excess Personal Accident Death Inexperienced Rider Excess Personal Accident Disability Uninsured Loss Recovery Limit Personal Accident Sight Repairs Guarantee NCD Protection Repairs Guarantee Period Guaranteed No Claim Discount Breakdown Cover (availability) Uninsured Driver Benefit The table below sets out the 2014 criteria that we are planning to remove for 2015. Criteria planned for removal Helmet and Clothing Cover Breakdown Cover (UK) Personal Accident Cover Breakdown Cover (EU) Uninsured Loss Recovery Cover 8