Is NCD Protection the next PPI scandal?

Veteransaver

So, I've never fallen for the protected NCD add on when buying car insurance.
However speaking to numerous people a very high proportion of them add it on each and every year. It seems to mostly cost them around £20-30, but what is it actually protecting?
The difference between having say a 7 year NCD and a 4 year NCD is generally only a few % at most of the premium.
And even the difference between 4 years and 0 years NCD seems to be around 10%-15% on average.

So the cost of the protection often seems like it may well be more than the amount of benefit, and that's in the fairly unlikely event they actually have a claim in that year.

Why is NCD protection only offered on car insurance and not home insurance for example?

And unlike other optional add ons for insurance like legal cover/breakdown cover, I don't think you can get Protected NCD cover elsewhere from a different party.

DullGreyGuy

Veteransaver said:

So, I've never fallen for the protected NCD add on when buying car insurance.
However speaking to numerous people a very high proportion of them add it on each and every year. It seems to mostly cost them around £20-30, but what is it actually protecting?
The difference between having say a 7 year NCD and a 4 year NCD is generally only a few % at most of the premium.
And even the difference between 4 years and 0 years NCD seems to be around 10%-15% on average.

So the cost of the protection often seems like it may well be more than the amount of benefit, and that's in the fairly unlikely event they actually have a claim in that year.

Why is NCD protection only offered on car insurance and not home insurance for example?

And unlike other optional add ons for insurance like legal cover/breakdown cover, I don't think you can get Protected NCD cover elsewhere from a different party.

When NCDP came into existence most insurers followed a very standard NCD scale:

0 - 0%
1 year - 30%
2 years - 40%
3 years - 50%
4 years - 60%
5 years+ - 65% or 70%

With most insurers following a claim your NCD falls by 2 years to a maximum of 3 years so 20 years NCD and you drop to 3 years losing 20% points of discount. Clearly the worst is those in their 3rd year who go from a 40% discount to a 0% discount. 

NCDs these days tend to be smaller, Admiral for example now give a 18% discount for 5-6 years -v- the old 65% however its also worth remembering that the majority of people have 5+ years and whilst NCD discounts have gone down premiums haven't gone up in relative terms so its just been a rebalancing 

NCD more broadly rarely exists in Home insurance but it is growing, of those that do offer NCD there are some that are offering protected NCD. As it's a more fledgling concept in Home there is more variability between providers on how it works etc whereas Motor is very long established and has many common practices. 

CliveOfIndia

It's not a scandal, it's clear what the cost and benefits are.

Veteransaver said:

It seems to mostly cost them around £20-30, but what is it actually protecting?

And even the difference between 4 years and 0 years NCD seems to be around 10%-15% on average.

If you assume that 4 years of NCD gives you a 10% reduction in premium, if your premium is £500 per year then you've saved £50.  So in the event of a claim, that's £20 well spent.  Obviously the figures will vary depending on what your premium actually is.

Protected NCD is, essentially, just another insurance product.  I've paid thousands over the years in house and car insurance, never claimed once - am I being ripped off?  I could, if I wanted, choose to not have house insurance - but it's my choice that the potential benefits outweigh the cost.  It's exactly the same with protected NCD - you're free to choose it or not, depending on your own view of the cost/benefit trade-off.

Veteransaver

CliveOfIndia said:

It's not a scandal, it's clear what the cost and benefits are.

Veteransaver said:

It seems to mostly cost them around £20-30, but what is it actually protecting?

And even the difference between 4 years and 0 years NCD seems to be around 10%-15% on average.

If you assume that 4 years of NCD gives you a 10% reduction in premium, if your premium is £500 per year then you've saved £50.  So in the event of a claim, that's £20 well spent.  Obviously the figures will vary depending on what your premium actually is.

Protected NCD is, essentially, just another insurance product.  I've paid thousands over the years in house and car insurance, never claimed once - am I being ripped off?  I could, if I wanted, choose to not have house insurance - but it's my choice that the potential benefits outweigh the cost.  It's exactly the same with protected NCD - you're free to choose it or not, depending on your own view of the cost/benefit trade-off.

is it really clear what the costs and benefits are?
NCDs are highly variable and vague
I'd argue that paying £20 for a 10%-20% chance (IE the chance of having a claim) of saving £50 is not money well spent. There'd have to be a 40% chance of a claim in the next year for it to break even, which considering you would already have built up 5+ years of NCD, makes that statistically unlikely.
And if you do have a claim, the cost of NCD protection goes up considerably too.

And PPI was "essentially, just another insurance product"....

Veteransaver

DullGreyGuy said:

Veteransaver said:

So, I've never fallen for the protected NCD add on when buying car insurance.
However speaking to numerous people a very high proportion of them add it on each and every year. It seems to mostly cost them around £20-30, but what is it actually protecting?
The difference between having say a 7 year NCD and a 4 year NCD is generally only a few % at most of the premium.
And even the difference between 4 years and 0 years NCD seems to be around 10%-15% on average.

So the cost of the protection often seems like it may well be more than the amount of benefit, and that's in the fairly unlikely event they actually have a claim in that year.

Why is NCD protection only offered on car insurance and not home insurance for example?

And unlike other optional add ons for insurance like legal cover/breakdown cover, I don't think you can get Protected NCD cover elsewhere from a different party.

When NCDP came into existence most insurers followed a very standard NCD scale:

0 - 0%
1 year - 30%
2 years - 40%
3 years - 50%
4 years - 60%
5 years+ - 65% or 70%

With most insurers following a claim your NCD falls by 2 years to a maximum of 3 years so 20 years NCD and you drop to 3 years losing 20% points of discount. Clearly the worst is those in their 3rd year who go from a 40% discount to a 0% discount. 

NCDs these days tend to be smaller, Admiral for example now give a 18% discount for 5-6 years -v- the old 65% however its also worth remembering that the majority of people have 5+ years and whilst NCD discounts have gone down premiums haven't gone up in relative terms so its just been a rebalancing 

NCD more broadly rarely exists in Home insurance but it is growing, of those that do offer NCD there are some that are offering protected NCD. As it's a more fledgling concept in Home there is more variability between providers on how it works etc whereas Motor is very long established and has many common practices. 

Correct, and is protected NCD abusing customer perceptions that full NCD is still "worth" a 60-70% discount? When the reality is very different.
Effectively the NCD is just a piece of paper now that says you have X years NCD, it has very little bearing on the premium discount

DullGreyGuy

Veteransaver said:

DullGreyGuy said:

Veteransaver said:

So, I've never fallen for the protected NCD add on when buying car insurance.
However speaking to numerous people a very high proportion of them add it on each and every year. It seems to mostly cost them around £20-30, but what is it actually protecting?
The difference between having say a 7 year NCD and a 4 year NCD is generally only a few % at most of the premium.
And even the difference between 4 years and 0 years NCD seems to be around 10%-15% on average.

So the cost of the protection often seems like it may well be more than the amount of benefit, and that's in the fairly unlikely event they actually have a claim in that year.

Why is NCD protection only offered on car insurance and not home insurance for example?

And unlike other optional add ons for insurance like legal cover/breakdown cover, I don't think you can get Protected NCD cover elsewhere from a different party.

When NCDP came into existence most insurers followed a very standard NCD scale:

0 - 0%
1 year - 30%
2 years - 40%
3 years - 50%
4 years - 60%
5 years+ - 65% or 70%

With most insurers following a claim your NCD falls by 2 years to a maximum of 3 years so 20 years NCD and you drop to 3 years losing 20% points of discount. Clearly the worst is those in their 3rd year who go from a 40% discount to a 0% discount. 

NCDs these days tend to be smaller, Admiral for example now give a 18% discount for 5-6 years -v- the old 65% however its also worth remembering that the majority of people have 5+ years and whilst NCD discounts have gone down premiums haven't gone up in relative terms so its just been a rebalancing 

NCD more broadly rarely exists in Home insurance but it is growing, of those that do offer NCD there are some that are offering protected NCD. As it's a more fledgling concept in Home there is more variability between providers on how it works etc whereas Motor is very long established and has many common practices. 

Correct, and is protected NCD abusing customer perceptions that full NCD is still "worth" a 60-70% discount? When the reality is very different.
Effectively the NCD is just a piece of paper now that says you have X years NCD, it has very little bearing on the premium discount

but insurers publish what their average NCD is worth, for example Aegis via a broker is available at https://www.ageasbroker.co.uk/our-services/no-claims-discount-information-2025/ 

NaughtiusMaximus

Veteransaver said:

CliveOfIndia said:

It's not a scandal, it's clear what the cost and benefits are.

Veteransaver said:

It seems to mostly cost them around £20-30, but what is it actually protecting?

And even the difference between 4 years and 0 years NCD seems to be around 10%-15% on average.

If you assume that 4 years of NCD gives you a 10% reduction in premium, if your premium is £500 per year then you've saved £50.  So in the event of a claim, that's £20 well spent.  Obviously the figures will vary depending on what your premium actually is.

Protected NCD is, essentially, just another insurance product.  I've paid thousands over the years in house and car insurance, never claimed once - am I being ripped off?  I could, if I wanted, choose to not have house insurance - but it's my choice that the potential benefits outweigh the cost.  It's exactly the same with protected NCD - you're free to choose it or not, depending on your own view of the cost/benefit trade-off.

is it really clear what the costs and benefits are?
NCDs are highly variable and vague
I'd argue that paying £20 for a 10%-20% chance (IE the chance of having a claim) of saving £50 is not money well spent. There'd have to be a 40% chance of a claim in the next year for it to break even, which considering you would already have built up 5+ years of NCD, makes that statistically unlikely.
And if you do have a claim, the cost of NCD protection goes up considerably too.

And PPI was "essentially, just another insurance product"....

The PPI scandal was primarily driven by mis-selling, far more so than the poor value of the product itself.

Extended warranties are a better comparison to NCD protection.

Veteransaver

DullGreyGuy said:

Veteransaver said:

DullGreyGuy said:

Veteransaver said:

So, I've never fallen for the protected NCD add on when buying car insurance.
However speaking to numerous people a very high proportion of them add it on each and every year. It seems to mostly cost them around £20-30, but what is it actually protecting?
The difference between having say a 7 year NCD and a 4 year NCD is generally only a few % at most of the premium.
And even the difference between 4 years and 0 years NCD seems to be around 10%-15% on average.

So the cost of the protection often seems like it may well be more than the amount of benefit, and that's in the fairly unlikely event they actually have a claim in that year.

Why is NCD protection only offered on car insurance and not home insurance for example?

And unlike other optional add ons for insurance like legal cover/breakdown cover, I don't think you can get Protected NCD cover elsewhere from a different party.

When NCDP came into existence most insurers followed a very standard NCD scale:

0 - 0%
1 year - 30%
2 years - 40%
3 years - 50%
4 years - 60%
5 years+ - 65% or 70%

With most insurers following a claim your NCD falls by 2 years to a maximum of 3 years so 20 years NCD and you drop to 3 years losing 20% points of discount. Clearly the worst is those in their 3rd year who go from a 40% discount to a 0% discount. 

NCDs these days tend to be smaller, Admiral for example now give a 18% discount for 5-6 years -v- the old 65% however its also worth remembering that the majority of people have 5+ years and whilst NCD discounts have gone down premiums haven't gone up in relative terms so its just been a rebalancing 

NCD more broadly rarely exists in Home insurance but it is growing, of those that do offer NCD there are some that are offering protected NCD. As it's a more fledgling concept in Home there is more variability between providers on how it works etc whereas Motor is very long established and has many common practices. 

Correct, and is protected NCD abusing customer perceptions that full NCD is still "worth" a 60-70% discount? When the reality is very different.
Effectively the NCD is just a piece of paper now that says you have X years NCD, it has very little bearing on the premium discount

but insurers publish what their average NCD is worth, for example Aegis via a broker is available at https://www.ageasbroker.co.uk/our-services/no-claims-discount-information-2025/ 

Yes some do, but is it in the key information document or policy (there's no mention of it in mine for example)

dunstonh

Is NCD Protection the next PPI scandal?

Not a chance.
a) its not linked to the consumer credit act.
b) it is bought as a self selected option and not sold.

DullGreyGuy

Veteransaver said:

DullGreyGuy said:

Veteransaver said:

DullGreyGuy said:

Veteransaver said:

So, I've never fallen for the protected NCD add on when buying car insurance.
However speaking to numerous people a very high proportion of them add it on each and every year. It seems to mostly cost them around £20-30, but what is it actually protecting?
The difference between having say a 7 year NCD and a 4 year NCD is generally only a few % at most of the premium.
And even the difference between 4 years and 0 years NCD seems to be around 10%-15% on average.

So the cost of the protection often seems like it may well be more than the amount of benefit, and that's in the fairly unlikely event they actually have a claim in that year.

Why is NCD protection only offered on car insurance and not home insurance for example?

And unlike other optional add ons for insurance like legal cover/breakdown cover, I don't think you can get Protected NCD cover elsewhere from a different party.

When NCDP came into existence most insurers followed a very standard NCD scale:

0 - 0%
1 year - 30%
2 years - 40%
3 years - 50%
4 years - 60%
5 years+ - 65% or 70%

With most insurers following a claim your NCD falls by 2 years to a maximum of 3 years so 20 years NCD and you drop to 3 years losing 20% points of discount. Clearly the worst is those in their 3rd year who go from a 40% discount to a 0% discount. 

NCDs these days tend to be smaller, Admiral for example now give a 18% discount for 5-6 years -v- the old 65% however its also worth remembering that the majority of people have 5+ years and whilst NCD discounts have gone down premiums haven't gone up in relative terms so its just been a rebalancing 

NCD more broadly rarely exists in Home insurance but it is growing, of those that do offer NCD there are some that are offering protected NCD. As it's a more fledgling concept in Home there is more variability between providers on how it works etc whereas Motor is very long established and has many common practices. 

Correct, and is protected NCD abusing customer perceptions that full NCD is still "worth" a 60-70% discount? When the reality is very different.
Effectively the NCD is just a piece of paper now that says you have X years NCD, it has very little bearing on the premium discount

but insurers publish what their average NCD is worth, for example Aegis via a broker is available at https://www.ageasbroker.co.uk/our-services/no-claims-discount-information-2025/ 

Yes some do, but is it in the key information document or policy (there's no mention of it in mine for example)

The problem is that NCD rates have to be updated regularly whereas policy books can go a number of years before they change. 

Its worth noting that those that are breach the CMA on publishing NCD rates etc are already being investigating as per https://www.gov.uk/government/publications/cma-letter-to-direct-line-group-about-a-breach-of-the-private-motor-insurance-order 

born_again

I remember that Offset Mortgages were going to be the next after PPI... That never happened.