Underwriting motor risks and rating factors
What the exam tests
Rating and risk selection: which factors predict motor claims, how insurers load or discount premium, and how fleet and telematics rating differ from private car rating.
Core rules
- Rating factors include driver age and experience, claims and convictions history, occupation, address and overnight parking, vehicle group, engine size, value, repair cost, security, annual mileage, use and excess.
- No-claims discount rewards claim-free years; it is not a legal entitlement and can be stepped back or protected. Voluntary excess reduces premium.
- Technical premium reflects expected frequency multiplied by severity, plus expenses, commission, capital and profit. Motor cycles through soft and hard markets.
- Telematics or usage-based insurance rates on mileage, time of day, braking and cornering. Fleet rating uses fleet claims experience and vehicle years.
- Fair presentation requires disclosure of modifications, drivers and use; fronting is misrepresentation.
Worked example
Two identical cars are rated: a 19-year-old named driver with a £500 excess and a 45-year-old with a £250 excess. The young driver attracts a higher premium because claim frequency and severity are higher for inexperienced drivers. If the car is parked on a dark street rather than in a garage, theft risk may increase the premium. Adding a second experienced driver may reduce or increase the rate depending on the insurer's model.
Traps
Correlation is not causation: occupation and postcode are proxies, and pricing must still be fair and compliant. Do not assume a protected NCD survives every claim. Modifications, business use and additional drivers must be disclosed. A cheap premium may reflect a higher excess or narrower cover.