Is No Claim Bonus Protection worth it?

david39

I have four years no claims bonus that is not protected. I am about to renew my policy and have been asked if I want to protect my ncb.

On the face of it - yes, I do.

But then, thinking about it, surely ncb protection has no real value.

If you make a claim, next time you come to renew your policy and shop around, you have to declare that you have made a claim and prospective insurers will adjust their prices in the light of that. The ncb insurance from your current insurer will not affect their levels of quote which will be based on your claims record.

Your existing insurer will say that their new premiums have taken into account your ncb protection but will up them anyway, claiming that they would have gone up more if you had not bought protection.

I think that in the current climate, provided you do not have a string of accidents, you will always be able to shop around and get a cheaper quote than that from your existing provider, whether your ncb is protected or not.

So where does ncb protection actually work to your advantage?

lisyloo

you have to declare that you have made a claim and prospective insurers will adjust their prices in the light of that.

Correct.

The ncb insurance from your current insurer will not affect their levels of quote which will be based on your claims record.

Wrong.
The quote will be based on your claims record AND your ncb (and gender, postcode, convictions etc. etc.).

Your existing insurer will say that their new premiums have taken into account your ncb protection but will up them anyway, claiming that they would have gone up more if you had not bought protection.

Correct.
Loading but no loss of NCB is cheaper than Loading plus lower discount.

I think that in the current climate, provided you do not have a string of accidents, you will always be able to shop around and get a cheaper quote than that from your existing provider, whether your ncb is protected or not.

Probably but it will be higher if you've lost your NCB.

So where does ncb protection actually work to your advantage?

Pretty much always.
Yes they can load your premium.
But what you are missing is that they will do that AS WELL AS taking away your NCB.
It isn't mutually exclusive.
It's not los of NCB OR a loading, you get BOTH without protected NCB, which is a double whammy.
Wherther it's worth what they are charging is a different question, but I always work it out to see how much it is before deciding.

I had a fault accident in 2008 and had a 3rd party claim against me.
There was no excess and I lost no NCD.
My premiums have gone up a little (£20 or £30) but not very mcuh, so it worked to my advanatage.

huckster

I agree. I have always had NCB protection since it was available to me. It only costs me an extra £20 a year and although I have never needed to claim, if I needed to do, atleast the NCD would be retained. Of course the Insurers will load the actual premium, but this is only reasonable, as risk wise, I would be seen as an increased risk.

Mr_K

I do get NCB protection each year, but it does go through my mind each year 'is it actually worth it ?' It seems to cost more than it used to and doesn't stop your premium going up if you have a bump. On balance I've kept it, but I'm sure it works out as a nice little earner for the Insurance industry

lisyloo

It seems to cost more than it used to and doesn't stop your premium going up if you have a bump.

It doesn't stop your premium increasing with a claim/accident loading, but it will go up by LESS than if you lost your discount as well, so you do get some value.

Yes sure insurers make a profit, that's their job.

I would say work out what it's going to cost (do quote with and without - very easy these days) and then decide based on your circumstances e.g. number of claims and the cost.
If you have a claim already then your premium will rise more, so it might be that if you are claim free, you might be prepared to take the hit of loss of NCD, whereas if you have claims already you will be laoded badly if you have more, so you might not be able to afford NOT to take it.

raskazz

The OP is incorrect on a purely mathematical basis.

If you construct a model which includes the following factors:

• The average load that insurers apply to add protected NCD
• The average load that insurers add for incurring a claim
• The typical reduction in NCD that results from a claim
• The increased excess that generally applies when protected NCD is included
• Insurance premium inflation
• Average levels of basic premiums

And run calculations for total insurance costs (premium and excess) against varying levels of claim frequency, on average you will find that:

• For those with a claim frequency below around 8%, it works out cheaper in the long run to not protect NCD
• For those with claims frequency from around 8% to 10%, costs are pretty similar for those who protect NCD as for those who do not
• For those with claims frequency above 10%, costs are minimised by protecting NCD. The vast majority of drivers fall into this category.

Of course, the future is uncertain but fundamentally, unless you think you will only make a claim once every 12 and a half years or less, it makes sense to protect it.

dacouch

raskazz wrote: »

The OP is incorrect on a purely mathematical basis.

If you construct a model which includes the following factors:

• The average load that insurers apply to add protected NCD
• The average load that insurers add for incurring a claim
• The typical reduction in NCD that results from a claim
• The increased excess that generally applies when protected NCD is included
• Insurance premium inflation
• Average levels of basic premiums

And run calculations for total insurance costs (premium and excess) against varying levels of claim frequency, on average you will find that:

• For those with a claim frequency below around 8%, it works out cheaper in the long run to not protect NCD
• For those with claims frequency from around 8% to 10%, costs are pretty similar for those who protect NCD as for those who do not
• For those with claims frequency above 10%, costs are minimised by protecting NCD. The vast majority of drivers fall into this category.

Of course, the future is uncertain but fundamentally, unless you think you will only make a claim once every 12 and a half years or less, it makes sense to protect it.

Said in the way only an underwriter could...lol :beer:

dacouch

Protected No Claims can be very handy if you have say a minor claim in a car park costing a few hundred, assuming you have been sensible* and kept your excess low it can be worth claiming for this if you have protected no claims bonus.

* I normally recommend keeping your excess low if you have protected ncb for this purpose.

In addition protected saves very large amounts of money if you are unfortunate enough to have two claims in the space of a year or two. Without protected this could increase a premium of £400 to circa £1000. With protected it would probably stay around circa £500

Quote

£1000 - 65% = £350
£1000 - 50% = £500

Losing two years of NCD will see an almost inevitable increase of nearly 50%. And it will take at least two years to build your NCD back up again. If you don't anticipate having to make a claim then you might as well strip everything away and go TPFT.

Can you afford not to protect your NCD?

dacouch

Quote wrote: »

If you don't anticipate having to make a claim then you might as well strip everything away and go TPFT.

That reminds me of when I genuinely did a car insurance quote for a Medium, she asked for Comprehensive cover and I said surely you could get away with Third Party Only and just increase it to comprehensive just before you need it. She was not amused

geordie_ben

dacouch wrote: »

That reminds me of when I genuinely did a car insurance quote for a Medium, she asked for Comprehensive cover and I said surely you could get away with Third Party Only and just increase it to comprehensive just before you need it. She was not amused

doubt she saw that one coming either lol