No Claims Discount - what is it really about?

user1977

NorbieG said:

I'm new to this forum and haven't quite got a nack of it, so I'm missing comments to my posts unless I visit the forum.  Can one get notifications to one's post from this forum?

Yes, go to https://forums.moneysavingexpert.com/profile/account-privacy and then Notification Preferences.

Or go to the Help section which also explains it: https://www.moneysavingexpert.com/site/forum-introduction-guide/

NorbieG

NorbieG said:

After declaring my car SORN for just over two years, I was surprised to lose my full No Claims Discount, which I believe was 76% of my premium. This loss occurred simply because I chose not to drive during that time, as I had limited use for my car following retirement. While most insurers accept unused NCDs for up to two years, and a few for up to three years, finding those that accept NCDs for up to three years has proven challenging.

It feels unfair to forfeit the No Claims Discount, which was protected through additional payments over the years, just because a Statutory Off Road Notification was declared. This was the case when I tried to put my car back on the road, suggesting that insurance companies benefit from every angle.

In my opinion, the No Claims Discount, once protected, should be preserved for the entirety of one's driving life, provided no claims are made.

Since I’ve lost my full No Claims Discount (NCD) of 76%, I now have to start from scratch and pay the full premium for my 24-year-old car. Despite being in great condition with only 84,000 miles on the clock, car dealers and insurance companies value it at just £500 - £700 (some dealers won’t even consider it).  Because I have to start from scratch again, it seems absurd to pay £750 to over £1,000 for comprehensive insurance on such an old car. Interestingly, third-party insurance is now more expensive than comprehensive cover, which wasn’t the case in the past.

GrumpyDil

At that age most of the risk is in damage to people/other cars so fully comp vs third party wouldn't massively increase the cost to the insurance company of any claim.  I also suspect fully comp might suggest an owner who is more likely to car for their car.

Only my thoughts so could be completely wrong on the rational. 

NorbieG

@user1977 thanks for your help.  All set now.  No wonder I wasn't receiving any notifications to my email.

NorbieG

@GrumpyDil I still love my baby - a 2003 Toyota Celica, and care for it as if it were new!  And, I'm an oldie as well - 77 years of age, still young-looking and at heart.   And still flexible and alert behind the wheel.  So none of the negativity one hears about older drivers.

DullGreyGuy

GrumpyDil said:

At that age most of the risk is in damage to people/other cars so fully comp vs third party wouldn't massively increase the cost to the insurance company of any claim.  I also suspect fully comp might suggest an owner who is more likely to car for their car.

Only my thoughts so could be completely wrong on the rational. 

Mass market consumer insurance isn't priced on suggestion/thoughts but on statistical analysis, for a lot of insurers they find their TPFT/TPO book has worse claims experience than Comp and so price it higher even if its counterintuitive. 

If you want to theorise then it's often put down to negative selection, just like those that choose a £2,000 excess etc. People who have to pay very high premiums think TPFT or a massive excess will be cheaper for them but that means there is a concentration of risky drivers on these which in turn drives up the price. 

Bigphil1474

OP, you aren't just insuring your car against it's loss though. It's not like home contents insurance. You are basically insuring yourself should you cause a motoring accident. If you were the cause of a multi car pile up where someone ends up paraplegic and needs constant medical care and ends up with £millions in compensation, it will cost your insurers a lot more than the £700 to replace your car. It won't cost you anything other than your excess (excluding anything you might have done to negate your policy of course).

NCD protection isn't a scam. It's clearly a product sold by insurers, but isn't about not seeing your premiums going up, but is about not seeing your premiums going up by more than they would otherwise. A simple example:-

With protected NCD : -

Your premium is £1,000. You get a 50% discount, so pay £500.

You have an accident.

Your premium goes up to £1,500, you still get a 50% discount, you pay £750. Increase of £250.

Without protected NCD: - 

Your premium is £1,000. You get a 50% discount, you pay £500.

You have an accident

Your premium goes up to £1,500. You now get a 30% discount as you only lose some of your NCB and pay £1,050 (£550 increase), or you've lost all your NCB and pay £1,500 (£1,000 increase).

For me it cost about £35 to protect my NCB last year. No brainer.

DullGreyGuy

Bigphil1474 said:

OP, you aren't just insuring your car against it's loss though. It's not like home contents insurance. You are basically insuring yourself should you cause a motoring accident. If you were the cause of a multi car pile up where someone ends up paraplegic and needs constant medical care and ends up with £millions in compensation, it will cost your insurers a lot more than the £700 to replace your car. It won't cost you anything other than your excess (excluding anything you might have done to negate your policy of course).

NCD protection isn't a scam. It's clearly a product sold by insurers, but isn't about not seeing your premiums going up, but is about not seeing your premiums going up by more than they would otherwise. A simple example:-

With protected NCD : -

Your premium is £1,000. You get a 50% discount, so pay £500.

You have an accident.

Your premium goes up to £1,500, you still get a 50% discount, you pay £750. Increase of £250.

Without protected NCD: - 

Your premium is £1,000. You get a 50% discount, you pay £500.

You have an accident

Your premium goes up to £1,500. You now get a 30% discount as you only lose some of your NCB and pay £1,050 (£550 increase), or you've lost all your NCB and pay £1,500 (£1,000 increase).

For me it cost about £35 to protect my NCB last year. No brainer.

Your sums aren't complete as you aren't factoring in the NCDP which often is a % of premium rather than a fixed fee. 

With my last Motor client they basically charged 1 years NCD (10%) so row one goes to £1,000 less 50% NCD plus 10% NCDP so pay £550 

In your example its saving £300 after a fault accident but costing you £50 a year so if you are claims free for 7 years you've paid more in NCD than you would have saved in future premiums and that doesn't factor the time value of money. 

Ultimately it's like anything else, you need to double check how much it will cost you personally and make your own choice. Like most things insurers sells the average customer will be worse off, else they wouldn't sell it, but ask anyone thats claimed and had NCDP and they'll say how happy they are that they had it. 

Given many insurers have vastly reduced the discount given by NCD since my last time in Motor it would make sense that the NCDP charge has been reduced however it does mean your more exposed to the premium hikes post claim 

tifo

Maximum (9 years) NCD used to be around 75% but these days most insurers state MAX NCD discount as low as 19%, making it useless to many if you shop around.

Having a clear driving record over 9 years makes no sense, most insurers will only state maximum 9 years NCD on a policy no matter how long you've had it.

It's all just marketing. I know people in my neighbourhood who pay less than me without any NCD.

The ones gaining are those who have accidents and the money they receive more than offsets the extra premiums they pay for a few years. Again I know people in the neighbourhood who have had accidents and they seem to pay less than me.

Bigphil1474

DullGrey, fair point, although as I said, my protection costs me about £35 based on quotes I got in February, so I think it's still worth it. 

Tifo, you have to compare like with like though - if you had 2 drivers of the same age, driving the same car, in the same neighbourhood, doing the same job and so on, and one had 5 years NCB and one had 0, then the quote from the same insurance company would be different and in favour of the one with the NCB. The one with no NCB could pay less if they shop around for the cheapest policy and the other just auto-renews, or they could be identical other than the job they do which balances out any discount. It's a bit simplistic to say it's all just marketing.