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No Claims Discount
Sometimes called "no claims bonus", NCB or NCD, most
Car insurers in the UK allow premium discounts for those policyholders
with claims-free records.
The level of the discount allowed can vary
depending on the class of motor insurance concerned e.g. the
discounts allowed for private cars are usually considerably
higher than those allowed for commercial vehicles.
Commercial
vehicles insured on a “fleet” basis are effectively
rated on the basis of the claims experience of each risk, and
the question of a no claims discount (NCD) does not normally
arise.
There is no standard scale of NCDs, but the following
are fairly typical of the discounts provided in private car
insurance.
Period of Insurance NCD 1 year (i.e. the preceding
year) 30%
2 consecutive years 40%
3 consecutive years 50%
4
or more consecutive years 60%
Most insurers operate a “step-back”
facility under which, if an insured makes only one claim during
the period of insurance, any NCD which has been earned will
be reduced e.g. from 60% to 40%, from 50% to 30%, or from 40%
to nil.
Policyholders can “protect” their car insurance
discount.
In return for a slightly higher premium, a policyholder with
maximum NCD can retain their discount if he or she has made
no more than, say, two claims in three periods of insurance.
Alternatively, no additional premium is required, but the scale
of discounts is marginally reduced.
Note, however, that it is
the discount that is protected.
Insurers need to take into account
a person’s claims history in setting the next year’s
premium, whether or not the discount is protected.
Policyholders
will, therefore, need to consider whether, having notified the
insurer of the circumstances, it is in fact economic to claim
under the policy.
The NCD is usually unaffected if the car insurer
can make a full recovery of its outlay e.g. from the liable
party’s insurer, or if the policyholder recovers all uninsured
losses (such as an accidental damage excess).
Claims for windscreen
damage do not normally affect NCD entitlement.
Sometimes the
NCD will be reduced at policy renewal time if a claim is expected
to come in, or is still waiting to be settled.
The discount
may be reinstated, however, if the insurer subsequently does
not have to pay out under the policy.
The NCD benefit was originally
limited to policyholders renewing their insurance with their
existing insurer, but it is now standard practice for insurers
to take into account NCD entitlement earned with another insurer.
Proof of the entitlement will be required, however, usually
in the form of the renewal notice issued by the last insurer.
Where the renewal notice has been lost, confirmation of the
NCD can usually be obtained from the insurer.
Normally, the
NCD attaches to the car insured under the policy (or any replacement
if this occurs during the period).
If a second car is purchased,
the NCD normally has to be earned from the start since, even
though driving may be restricted to one person, the car can
still be at risk of theft or damage.
Some insurers are, however,
prepared to allow the discount earned on one car to be carried
over to the other.
There are likely to be conditions though,
in particular concerning the number of drivers with access to
each car.
Some Car insurers are also prepared to give special introductory
discounts for the second car. It can pay, therefore, to shop
around.
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