The Intermediary – March 2025 - Flipbook - Page 68
P RO T E C T I O N
Opinion
Defaqto ratings:
Beyond the stars
A
t Paymentshield,
we’ve worked with
Defaqto for 15 years.
Our relationship was
born out of a desire
to help advisers give
their clients the peace of mind they
deserve when protecting their home.
Now that we’re a month into
Defaqto’s new rating year, which
began on 1st February, it’s a good
time to explore more about what
these ratings actually mean, and how
advisers can use them to support their
client conversations.
The background
Defaqto’s Star Ratings aim to show
customers where a product sits in the
market based on the level of features
and benefits of the policy. They are
recognised as an indication of quality
across financial products.
What’s key is that Defaqto
rates products and not providers.
Importantly, providers do not pay
for their products to be rated, which
ensures a review of the entire market,
with advisers and their clients able
to go to the Defaqto website for a
fair and unbiased evaluation of
available products.
The rating process itself is
extremely thorough. Defaqto analyses
more than 95 features across 255
buildings insurance products and 165
features across 283 contents insurance
products. Defaqto then selects the
most important features to include
within the Star Rating Criteria.
For 2025, there are 35 Criteria for
buildings insurance and 62 Criteria for
contents insurance.
Where Defaqto goes even further
is through its DNA scoring system,
where individual product features
receive scores from one to five based on
customer benefit. The system doesn’t
simply reward the highest numbers,
it puts weight behind policies which
provide genuine impact to customers
in response to their needs.
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The Intermediary | March 2025
It’s crucial for advisers to be aware
of this. Defaqto uses its knowledge
of the market, informed by data
from customer surveys, input from
providers and also rulings by the
Financial Conduct Authority (FCA)
and Financial Ombudsman, to ensure
that its ratings are dependable.
Its ‘Core Criteria’ rating concept
means that policies have minimum
standards that must be met before
a certain rating can be given. For
example, Paymentshield’s five-star
rated home insurance policy has had
to meet 16 buildings insurance and
28 contents insurance Core Criteria
benchmarks before it’s been given the
top rating.
Importantly, the ratings themselves
are not static. While Star Rating
Criteria are reviewed annually, the
rating that each individual product
achieves is not fixed for that 12-month
period, meaning that any material
changes to the policy can lead to an
increase or decrease in the Star Rating
at any point during the year.
Understanding the nuance
While a conversation about Defaqto
ratings can help advisers demonstrate
that all insurance is not created equal,
where advisers can add real value to
their customers is by appreciating the
diversity within ratings.
Looking at five-star rated contents
insurance, the coverage for
outbuildings can vary from £2,000 to
the full contents sum insured, but all
fall within the five-star category.
Therefore, even though a client can
go to the Defaqto website to compare
star ratings themselves, an adviser
can provide much richer information
about the benefits of individual
products. Indeed, by understanding
that two five-star rated insurance
products indicate comprehensive
coverage but not identical benefits,
advisers can beer match specific
products to client needs, and help give
additional peace of mind.
EMMA GREEN
is distribution director
at Paymentshield
By understanding
that two five-star rated
insurance products
indicate comprehensive
coverage but not identical
benefits, advisers can
better match specific
products to client needs”
Tools like Defaqto Compare,
embedded on the Paymentshield
website, can help advisers to
understand where a particular
provider’s policy might have
particular strengths. This can be used
to show clients how those features and
benefits differ from the features and
benefits of other policies available.
At Paymentshield, we’re passionate
about working with partners in
the industry who deliver powerful
insights and technology for advisers.
Understanding the intricacies
of Defaqto Star Ratings – and how
they best fit differing needs – is
critical to delivering valuable advice,
and can make all the difference in
forging lasting relationships with
your clients. ●
