NCD/NCB Explained


"No Claims Discount" or "No Claims Bonus" is something that is very easy to explain in principle;

The more you drive without making a claim the cheaper your renewal premium will be.

but in practice the details usually get quite complicated.

To the right you can add claims and see their effect on how NCD/NCB will be promoted or stepped back at renewal time.

Stepback Or Promotion

If you have say 6 years of No Claims and then have a claim do you lose all of your NCD?

Logically the answer would be seem to be yes, but car insurance is a competitive market so the cost and type of claim could mean that your NCD would stay the same rather than increase or it could be reduced but probably not reduced to zero.

Most insurers offer some sort of NCD Protection but this is not an absolute, it usually has limits on the number of claims and possibly their value and then it is no longer applicable.

Nowadays insurers keep an ever increasing count of claim free years even when this number has no effect on the premium. You may have 25 years claim free so can claim a 25 year No Claims Discount, in practice most insurers stop increasing the discount after 5-10 years.

No Claims Discount At Renewal Example Calculator

Motor Risk NCD Promotion Data Capture Screen
Preset Risks

NCD Details

Years NCD: Has Protected NCD: Renewal Date:
Claim Details clear


At Fault

AD Costs

TP Costs
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Insurance Scheme Name: MainStream Insurance Low Risk
Target Customers: Drivers without accidents or conviction and neither very young or old in a safe car and job
Quote Time:Wed 17/Jun/2020 01:48:27
Quoter Version: Logic=20/May/2020 10:10 Rates=20/May/2020 10:10

Step                                                                       Factor   Premium  Type
Claim: Accident 01/May/2020
Claim: Accident 01/May/2020
Claim: Accident 01/May/2020
NCD Promotion/Stepback
  NCD Stepped Back As No NCD Protection or Protection But Too Many Claims

NCD Years
Initial Years NCD:8
New Years NCD:5

Quotation Status:Completed

NCD Years And Percentages

Initial Years Promoted Years Initial % Promoted %

Alcohol Recovery
0 1 0 23%
1 2 23% 45%
2 3 45% 49%
3 4 49% 60%
4 5 60% 62%
5 6 62% 65%
6 7 65% 70%
7 8 70% 70%

Young Driver
0 1 0 50%
1 2 50% 60%
2 3 60% 70%
3 4 70% 70%

0 1 -10% 0%
1 2 0% 20%
2 3 20% 30%
3 4 30% 40%
4 5 40% 45%
5 6 45% 50%
6 7 50% 50%

The Difference Behind NCD Years And %

On the right there is a table of the number of years NCD and the percentage discount that the years represent for three of the quoters.

The first noticeable fact is that the three schemes all have a point where more years NCD does not result in a greater No Claims Discount, and that this point is at a different number of years.

The Alcohol Recovery scheme is cautious with how it allows NCD, it is trying to address the issue of does the driver still drink and drive and if so is he just getting away with it and another incident is likely?

There are big jumps in the discount after 1 and 3 years claim free, the rationale being a year drink free and then allow time for a relapse and the subsequent incident.

The Young Driver scheme hits the maximum NCD after only three years, this is simply because the driver ceases to be a young driver at this point and needs to be moved onto other schemes.

The Mainstream quoter actually has negative NCD, drivers with no NCD get a 10% loading, as the scheme is aimed at the normal safe driver why would that driver not have any NCD?

Possibly because of claims, possibly because of a lack of recent driving experience as the main driver of a vehicle.

Again because it is a safe driver scheme the maximum NCD percentage is quite low and after 4 years NCD doesn't increase by the much.

The point is that NCD years and percentages can easilt become a marketing tool, and a 75% NCD from one scheme may stil result in higher premium than a 40% NCD from another scheme.

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