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Location:
Brisbane
Registered:
November 2002
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Re: No claim bonus
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Sun, 16 March 2003 03:23
 
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Basically for every year of insurance that you hold without making a claim, your insurance company will offer you a discount (no claim bonus). It depends heavily on the company as they all have their own guidelines as to what percentages they offer, but generally:
1 year no claims = 20% NCB
2 years no claims = 30% NCB
3 years no claims = 40% NCB
4 years no claims = 50% NCB
5 years no claims = 60% NCB
This is a discount that they offer you, a god customer, over the standard price that they would offer John Doe who walks in off the street with no insurance history. They feel that if you haven't had an accident for x years then you must be a good driver, therefore are less likely to have an accident and in turn less likely to make an insurance claim.
A lot of (uneducated) people complain after having an accident that their no claim bonus goes down and their insurance goes up, having a whinge that "that's the whole point of insurance" and that "it's a rip off". What people don't understand is that the company is NOT putting the price up, the price is still basically the same (remember John Doe above), but the discount that they offer you off the standard price - for being a good customer who doesn't claim - has just been reduced.
As for Third Party Property Damage insurance, some companies will honour it for a no claim bonus and some will not. Often it is done on the same basis - one year is one step up... but some companies do it two-for-one... two years of third party with no claims equals one step up on the NCB table. The reason for this is that on third party insurance you're only half as likely to report an accident to your company (why bother if you can't claims for your own damage?) so they feel that it is possible you may be having accidents and not telling them.
One thing you need to understand though is that having third party insurance doesn't GIVE you a no claim bonus. You don't actually have one until you take out comprehensive insurance and the discount is applied. So, you may have held ten years of third party, and if you were to take out comprehensive cover you would be OFFERED a no claim bonus of 60%, but until it is actually applied to a policy you don't HAVE the no claim bonus ()so your company will not send you a letter stating that you've got the no claim bonus unless you really do).
To stir something else into the equation with what I mentioned about the price technically not going up even though you're paying more for the insurance, you need to look at the way a company sets it's pricing. It looks at the number dollars it has paid out in claims in your area, for your age group, for the type of car you have, they factor in extra for modifications and a poor driving/claims history, then they balance that out against the number of dollars they have received from customers for their insurance. If there is an increase in claims for one of the categories you fall into (remember, you just had an accident, so there's one that didn't happen last year), then they may increase the price in that category, hence your price then may increase a small amount as a result. Again it all comes down to how likely your are to have a claims - all based on the statistics the company has.
For what it's worth, there's not much money in the insurance business - many companies pay out more in claims each year than they actall get in premiums - they often only make money by investing the payments they have received.
Well, that was quite the essay! 
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