Protected No Claims Bonus? Scam?

DavidHayton

You can of course argue that all insurance is a scam since, in order to generate an honest profit, the insurance company needs to collect more in premiums than they pay out in claims. So, on average, you will be worse off (financially) by taking out the insurance - providing that the underwriter has correctly assessed the risk.

David

Norman_Castle

Sounds like Swiftcover or some other cheap and cheerful company

With swiftcover you don't gain ncb for the year the windscreen is replaced, nor do you lose a years ncb. But, as swiftover only give a maximum of 5 years ncb, drivers with more than this should be unaffected.

Wig

raskazz wrote: »

No, you should look at at mathematically with all the relevant variables, i.e. premium inflation, claims loads, excesses, load for adding protected NCD. Your analysis is too simplistic. It also ignores the 2nd year effects on premium as you are still earning back bonus.

It's not too simplistic at all. For one thing you can't account for every eventuality, i.e. there is an argument to keep these things as simple as possible,

What you can do is take this years premium say £200 like mine is
Take your NCB say it's the max maybe £70%
Take your NCB level at -2 years maybe 50% - 65%
So if you claim you could lose 15%, You could lose 5%.

Check online what your premium will be with an at fault claim with 2 years less NCB say £300
15% (worst case scenario) of £300 is what you will have lost = £45
For lets say a £30 fee

You say what about the following year?

Ok 2 x NCB protection = £60
first year premium loss £45
second year premium loss £15

You say what about premium inflation ok £20 per year 15% of which for the first year is £3
5% for the second year = £1

Total increase in avoidable costs after 1 claim = £64
Cost of avoiding avoidable costs = £60

It doesn't sound like a good bet to me.

I say excesses are irrelevant, because your premium is what it is. If you are going to go and change your excesses you are comparing apples with pears.

I say premium inflation is so insignificant it is irrelevant and you will never know what it will be anyway.

I say factoring in the second year gains & losses is not as important as the first year, the second years losses will always be less than than the first year so if you can live with the losses for the first year, you can easily live with the second year losses. And so they can be ignored for the calculation.

I say keep it simple and you won't go far wrong, that means

• Know how much NCB you will lose i.e. 2 years
• Know what that will be in % loss
• Get an online quote for an at fault claim
• Work out what 15% (or whatever %) will cost of the total premium

And make a decesion on that basis.

And remember, every year you don't claim you build up your 'pot' of saved money, so your savings make more and more sense to keep going without protection.

And I would say the above example (worked with a 15% loss in the first year) could be closer to the very worst scenario of losses - for people with full or high NCB. Because Co-Op insurance says the following:

Figures in blue at renewal after 1 claim
figures in green %NCB lost

1 year - 50%............25%..........25%
2 year - 60%............40%..........20%
3 year - 65%............50%..........15%
4 year - 67%............60%..........7%
5 year* - 70%..........65%..........5%
6 year - 72%............67%..........5%
7 year - 73%............70%..........3%
8 year - 74%............72%..........2%
9 year - 75%............73%..........2%
*The max for new customers

adamc260

Your not quite getting what protected no claims discount is

Each YEAR of NCD is worth a % off the premium. If you make a claim it steps back 2 years. So not only would the fact you've had a claim (and therefore be a higher risk) push your premium up, but you'd lose 2 years NCD which could be another 10-20% so no it's not a scam.

Tucker

raskazz wrote: »

If you actually look at it scientifically instead of applying sweeping knee-jerk comments with no basis in fact, then you would see that protected NCD is worthwhile for all but people with abnormally low claim frequencies (less than one every ten years).

If you build a mathematical model which takes into account premium inflation, average claim loads, average cost of protected NCD and average increase in excesses that result from protected NCD you will see that it is far from a "waste of money".



Absolute twaddle.

Protected bonus is a joke and well you know it. But then you're clearly over protective/sensitive of the industry.

Never had it, never will and I'll be far richer for it.

shelly

Tucker wrote: »

Protected NCD has always been a waste of money and in practice rarely helps when you have claimed as other insurers normally will not honour it.

It's there for those that buy overpriced warranties or cover incase some underground pipe leaks.

Who are these companies you talk of?
I shop around at renewal, declare the claims we have made, declare full NCB that's protected and have never had an insurer say to me that they won't accept the NCB because a claim has been made.

dacouch

DavidHayton wrote: »

You can of course argue that all insurance is a scam since, in order to generate an honest profit, the insurance company needs to collect more in premiums than they pay out in claims. So, on average, you will be worse off (financially) by taking out the insurance - providing that the underwriter has correctly assessed the risk.

David

Generally most insurers pay out more in claims and running costs than they take in premiums on motor insurance (Underwriting loss). In normal circumstances a lot of companies pay out between £1 and £1.10 for every £1 in premium they receive.

They make their money investing the huge sums of money they receive in between. A recession normally results in Insurers putting premiums up as their return from investments drops and the value of their property investments drop. This is one of the main reasons for the current premium increases.

In the current market (It's known as a hard market) due to the premium increases most Insurers will start (Or have already started) making underwriting profits eg paying out less in claims than they receive in premiums.

The market circle has repeated many many times generally caused by a recession or massive market change such as 9/11. The premium increases will eventually attract new players into the market which causes prices to go down which will keep happening until the next recession or event. We have just come off a "Soft" market where market forces were putting premiums down which stopped when the recession started

dacouch

Tucker wrote: »

When a customer claimed on it, the premium was often loaded, so you were still paying more. It's just sneeky way of charging more. We always struggled to find companies that would honour it on transfer. Most wouldn't.

The fact you were shopping around after claiming on Prot NCD probably says alot!

That website is making a very large generalisation in that statement as the majority of Insurers would honour a transfer of protected no claims bonus with one claim.

Are you aware the link you give has a referer code attached, meaning any business generated using your link earns someone referral commission.

P.S that website is breaching a number of rules, I'll be reporting Wilsons to the relevant authorities

mikey72

raskazz wrote: »

If you actually look at it scientifically instead of applying sweeping knee-jerk comments with no basis in fact, then you would see that protected NCD is worthwhile for all but people with abnormally low claim frequencies (less than one every ten years).

If you build a mathematical model which takes into account premium inflation, average claim loads, average cost of protected NCD and average increase in excesses that result from protected NCD you will see that it is far from a "waste of money".

Absolute twaddle.

So, as an underwriter, why do you want to sell it?

If underwriting is making a loss overall, why are you pushing a product that will further excarberate losses?
Would it not be better to remove it entirely, and let premiums naturally increase for higher risk drivers?

Tucker

dacouch wrote: »

That website is making a very large generalisation in that statement as the majority of Insurers would honour a transfer of protected no claims bonus with one claim.

Are you aware the link you give has a referer code attached, meaning any business generated using your link earns someone referral commission.

P.S that website is breaching a number of rules, I'll be reporting Wilsons to the relevant authorities

Do what you want. It's just a website explaining the score as far as I am concerned.

Sounds like you don't have enough to worry over if that's digging you? :rotfl: