Around a quarter of comprehensive car insurance products in the United Kingdom no longer meet Defaqto’s 3-star benchmark after the ratings provider strengthened its minimum standards for that level.
In its newly launched 2026 Star Ratings, Defaqto said 82 comprehensive car insurance products have been moved from 3 stars to 2 stars under updated core criteria. The figure is based on 317 comprehensive car insurance products that were star rated as of February 1, 2026.
Defaqto said the update reflects structural shifts in the car insurance market, where tiered product suites have become increasingly common. While tiering can increase consumer choice and support price differentiation, it has also led to certain benefits being removed at lower levels of cover.
Under the revised criteria, motor products rated three stars and above must now include core protections such as windscreen cover and personal belongings cover. Where the majority of the market includes such features as standard, products that omit them can no longer reasonably be considered representative of average cover, according to Defaqto.
Mike Powell, insight manager at Defaqto, said the changes were designed to preserve the integrity of the rating as product design evolves.
“Star Ratings are designed to bring clarity to complexity. When standards in the market shift, the framework must respond. The changes we’ve made at the three-star level protect our definition of ‘average’ in markets where tiered propositions are becoming more common,” Powell said.
“Strengthening core criteria ensures ratings remain meaningful for consumers and credible for providers.”
Defaqto’s star ratings were first introduced more than 25 years ago. Around a decade ago, the firm applied star ratings to fewer than 7,000 products. Today, close to 10,000 product lines are assessed across more than 80 product areas spanning general insurance, banking, protection, pensions, and investments.
The update comes against a backdrop of significant change across the UK motor insurance market. According to the Association of British Insurers, the average UK premium stood at £551 in Q3 2025, down £60 from the previous year. However, that period of falling prices may be drawing to a close.
For every £1 earned in premiums in 2026, UK motor insurers are forecast to pay out £1.07 in claims and expenses, according to EY analysis, with premiums expected to rise around 5%, adding roughly £25 to the average policy.
Data from Consumer Intelligence shows the biggest development in the market has been the record number of price cut banners appearing on comparison websites, driven by the proliferation of new products entering the market offering tiered propositions at competitive positions.
That proliferation has drawn scrutiny from consumer advocates and regulators alike. Industry observers have raised concerns that consumers now see multiple tiers from one brand on price comparison websites rather than diverse options, which might limit perceived choice and reduce competition, particularly for smaller brands.
The Financial Conduct Authority has simultaneously increased its oversight of how insurance products deliver value to consumers. Under its strategy for 2025 to 2030, the FCA has identified the Consumer Duty as a priority, with embedding the Duty across sectors considered critical to ensuring consumers are supported without the need for additional prescriptive regulation.
As part of its 2025 to 2026 priorities, the FCA has also launched a market study into premium finance, reviewing whether people who borrow to pay for motor and home insurance are receiving fair, competitive deals, with interim findings published in July 2025.
In December 2025, the FCA moved to simplify its insurance rules. The final rules aim to give more flexibility and responsibility to insurance firms, such as determining the frequency of their own product reviews. The regulator has signalled it will continue to review its requirements further into 2026.
