Motorists put No Claims Discount at risk

Over 7.7 million motorists in the UK are putting four years or more of their No Claims Discount (NCD) at risk by not protecting it. This could result in potential premium hikes of around £92 per year in the event of an accident, according to independent price comparison and switching service uSwitch.com.

Almost one in three UK drivers have accumulated enough NCD to be eligible for protection, yet choose not to take this option. Should they have just one accident, the collective cost to these drivers would stand at £707 million in increased insurance premiums.

Motorists can avoid losing their NCD (also called no claims bonus) by paying an average of £30.72 to protect it. This one off annual payment allows motorists to make a claim in the event of an accident without losing their NCD and, in some cases, escape a premium increase. Most insurers offer the option of NCD protection to drivers that have had at least four claim-free years.

Some insurers offer discounts of up to 55% if four years worth ofNCD have been accumulated, increasing in some cases to 75% for five years. As a result, 11.4 million drivers in the UK (45%) chose to take out this cover to protect their insurance premiums. However, uSwitch.com warns drivers to make sure they understand the terms of the NCD protection offered by the insurer, as policies can vary hugely.

Ashton Berkhauer, Insurance Expert at price comparison and switching service, uSwitch.com comments: “No claims bonus protection plays a really important role as it covers motorists against premium hikes when they make a claim. As the cost of claims continue to rise, insurers will increase premiums to cover their costs. Consumers should therefore consider the benefits that protecting their NCD can offer.

“Nearly three quarters (72%) of motorists say they choose their car insurance policy purely based on price, but, with such variation across the industry when it comes to protecting NCD’s, this could be a false economy. Choosing a policy should be based on good value for money and getting the most comprehensive policy for your needs. The cheapest quote may not always provide all the features that consumers need from their car insurance and sometimes finding the best NCD protection can be just as financially beneficial as finding the best insurance policy.”

The good news for motorists is that a number of insurance providers offer NCD protection for life, such asMore Th> n and eCar. In theory, drivers with this policy can have as many accidents as they please without losing any of their NCD. However, just because these providers allow drivers to keep the same level of protection on their claims, it is important to note that risk profiles can change following any accident, and in turn can affect the cost of an insurance policy.

When it comes to a limited number of accidents, the next best NCD protection comes from insurers which allow drivers to have one accident in one year. For example, insurers such as Cornhill Direct and Direct Line will all protect a driver’s NCD for one accident in one year or two accidents in three consecutive years. However, insurers such as the AA, Fortis, Quick Fit and Norwich Union will only protect motorists’ NCD for two accidents in five years, representing an inferior deal.

uSwitch.com research also reveals that even though the average cost of protecting a no claims bonus is £30.72, in some instances it is significantly cheaper. Admiral Insurance will protect a five year NCD for as little as £2.10, increasing a premium of £299.25 by just 0.7% to £301.35. However, if motorists do not protect their NCD and go on to make a claim then their NCD would be reduced by two years and would mean that they would have to pay as much as £357.00 to Admiral. This is an increase of £56 in one year alone.

Those motorists who have failed to protect their no claims bonus could stand to lose up to £200 on their car insurance if they had an accident, compared to motorists who have a five year NCD protection. uSwitch.com research reveals that LV= can charge customers a premium of £565.60 if they have a history with a 3 year NCD, one accident, and no protection, versus a premium of £354.69 if they have a 5 year NCD with protection.