My partner was involved in a minor prang about two months ago, resulting in a fair amount of shouting, an insurance claim for some work to our bumper, and minimal repairs to the other vehicle.
A few weeks later my renewal quote arrived (my partner is a named driver on the policy): it had leaped up by £550. I was shocked because I had added no-claims protection to my policy, and was now left wondering whether I should have bothered.
I had opted to protect my no-claims discount with insurer Diamond after more than a decade of incident-free driving. It cost 10% of my premium – around £60 – but seemed worth it to keep my clean claims history.
After my partner’s little accident, I had asked if the claim would affect my no-claims discount, and was assured that it wouldn’t. What I forgot to ask was how it would affect the cost of my cover.
The £550 increase is complicated by the fact that I’ve moved in the past year, and my new area is more risky. Diamond won’t say how much of the increase is a result of the accident, but when I ran a quote on its website using my old address, but inputting details of the accident, the cost was up £300 on last year’s figure.
So, despite protecting my no-claims bonus, the fact I had made a claim came back to haunt me.
Anyone buying insurance will be asked about their claims history and if they want to protect any bonus they have built up. Both will affect how much they pay.
Some insurers say they will reduce premiums by up to 90% for careful drivers who have gone more than five years without making a claim, and offer motorists the chance to keep that discount even if they have an accident by protecting their no-claims bonus. According to price comparison website Gocompare, a third of motorists opt to do so. But is this protection – which can add up to £100 a year to the cost of a typical car insurance policy – really worth it?
There is no simple yes or no answer, as insurers offer different discounts for those who have not made a claim or have protected their bonus, and have different approaches to those who have claimed. Some publish details, whereas others say it is commercially sensitive information.
Yet no-claims bonuses should be straightforward – you tell an insurer how many years you have been driving without making a claim on your policy, and it gives you a discount based on that. Careful drivers who live in safe areas see the price of their policies fall, while anyone who recently had a bump or worse pays the full premium.
But it isn’t that easy. For a start, most insurers offer no-claims bonuses on a sliding scale. Not all disclose figures. However, Graeme Trudgill of the British Insurance Brokers’ Association says that, typically, someone who has driven for a year without a claim will get a discount of around 30%, while someone in their second year of driving will get around 40% off and so on, until after five years drivers are offered a discount of around 60%.
Some insurers go beyond that. At esure and sister insurer Sheilas’ Wheels, discounts of up to 75% are available to those with 10 years without claims, while at Axa, a 90% discount is advertised. This kind of reduction can make a big difference. All things being equal, a driver who has built up two years’ no-claims bonus might pay a third more each year than someone who has built up five years of discounts.
So it’s little wonder that drivers may be tempted by the offer of protecting their discount. At Direct Line you can start protecting your bonus at four years of incident-free driving, while at Aviva you can do so at three years.
This optional extra can, according to Trudgill, typically add 5%-10% to your annual premium, though some insurers charge more (esure charges 12.5%) and some less (More Than typically charges 3%). For that, insurers say you can keep your discount even if you find yourself claiming.
Some have a rule where you are offered several “lives” over a set period. At Aviva, drivers with four years’ protected no-claims can have two at-fault claims in three years without their discount being affected. Some insurers, including Aviva, More Than and Admiral, offer “guaranteed no-claims bonus” or “protected no-claims discount for life”, which let you have any number of accidents and still get the discount.
But – as I discovered – you shouldn’t expect this protection to mean your premiums will not go up if you have an accident.
Malcolm Tarling of the Association of British Insurers says: “The insurer will have to look at the risk. It may be that the data your insurer holds shows that the risk goes up if you have been involved in an accident.”
Adrian Webb at esure says it does. “Anybody who has had an accident is more likely to have an accident in future. We don’t know why. It may be a change in the perception of the car – if it has been in an accident, maybe people are not as careful with it.”
Webb says that by protecting my discount, I have avoided seeing my premium leap further. But while drivers without protection might expect a claim to set the clock back to zero, most insurers only reduce the no-claims history by two years, unless you have a long no-claims history.
A driver entitled to a 60% discount because he or she had more than five years without incident will see their history go back to three years, and their discount fall to perhaps 45%, but they will start to accrue more years again, and in two years could be back where they started.
This means the saving from protecting the claim may not be as great as you imagine. Say you have a policy with esure with a headline premium of £1,000. You are entitled to five years’ no-claims bonus, which reduces that by 70%to £300. If you make a claim, next year you are only entitled to three years’ no-claims discount, or 55%. Your premium will be £450, but the following year it will go down to £350 and the year after to £300. In total you will have paid £200 more, but had you paid for the protection each year, you would have paid around £112, so the difference is only £90. Had you spent three years before the accident paying the same amount and driving without incident, you would have broken even.
But these calculations assume you don’t face a higher premium for posing a greater risk. If you do, you will of course pay a percentage of that too, so the saving could be bigger. And if you have more than five years’ no-claims discount, many insurers will disregard it when resetting the clock.
So, despite the fact that I hadn’t claimed in 18 years of driving and qualify for Diamond’s 10-year-plus no-claims discount, if I had not protected myself I would have gone back to three years’ no-claims.
With Diamond unwilling to tell me how much it discounts for each year, I can’t tell how much I have saved by protecting my no-claims bonus. But when I ran my details through Gocompare, I found that if I went to a new insurer with the three years’ no-claims certificate Diamond would have given me, the best price I could get was £1,152 a year. With the 10 years no-claims history I can still claim, the best price is £890. That’s a £260 saving in the first year. The amount will fall, but because of the way Diamond structures its step back, I would take some time to build up to that a 10-year discount again. Protecting my no-claims bonus at Diamond this year will cost me £86, which seems just about worth it.
With insurers taking different approaches, it is almost impossible to work out how valuable protecting your no-claims bonus could be. So get quotes with and without the cover, with your existing no-claims history, and with two years less. That will at least give you an idea of how much losing your current bonus could cost.