No Claims Discount (NCD)
What is a no claims discount (ncd) / no claims bonus (ncb)?
No Claims Discount (NCD) or No Claims Bonus(NCB), is a major feature of any car insurance policy because it gives the policyholder a percentage discount on their premium for every year they have not had a claim.
NCD is an insurance feature that is almost unique to car insurance policies. Originally known as NCB, or No Claims Bonus, the name was changed to reflect the fact that this feature did not offer the policyholder any extra money, but rather a reduction on the next year's premium. NCD can significantly lower the annual premium of a car insurance policy. It is, however, important to disclose the fact that you have NCD when receiving the quote; otherwise your premium may be much more than expected.
How does no claims discount work?
The scale of the discounts associated with NCD can vary between insurance companies; however we have provided an outline of the typical scale for private vehicles below:
- 1 year claim free driving: 20% NCD
- 2 years claim free driving: 30% NCD
- 3 years claim free driving: 40% NCD
- 4 years claim free driving: 50% NCD
- 5 years claim free driving: 60% NCD
The maximum amount of NCD that you are allowed is 60%, representing 5 years of claim free driving. With other classes of vehicles (such as commercial vehicles) NCD will typically begin at 10% after one year and go to a maximum of 30%. NCD will, however, generally change between insurers, so it is important to note what rates your insurer will use.
In the event of an accident NCD works on a 'step back' system. This means that a single serious accident should not eliminate the entitlement that you have towards NCD during the next policy year. An illustration of the step back system can be found below:
- 60% NCD will become 30% when the policy renews
- 50% NCD will become 20% when the policy renews
If you had an NCD below 50% and are involved in a claim during the policy year then you will receive no NCD when the policy renews. In addition to this, policyholder's with NCD of over 50% who make 2 or more claims during the policy year will not receive any NCD when the policy renews. Please remember that this NCD 'step back' system will only usually apply to private vehicles and with other classes of vehicles a single claim will typically mean that there will be no NCD entitlement the following year.
If you transfer your policy from one insurer to another you are able to transfer your NCD as well. In order to receive your NCD entitlement on the new policy you must provide proof of the previous No Claims Discount. NCD can be proven by obtaining a written confirmation from your previous insurer or simply displaying the old policy document; your NCD will typically be shown in the policy schedule as a percentage.
NCD will expire within 12 months after the cancellation or end of a policy. This means that if you have not had a car insurance policy for more than a year, you will not be able to receive any NCD on a new policy and must start your no claims history afresh.
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