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Why insurance costs increase after accident even with NCD protectection

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Please forgive me if the terms aren't 100% correct.

Different insurers do their calculations differently, but this is my understanding of the basic process:

 

No Claims Discount, normally rated in years, is a discount given which insurers apply to your actual calculated 'rate' or risk.

Different insurers use different amounts for the years earned - no consistency.

 

Your Rate or Risk is calculated based on some industry calculations tailored by individual insurers, which consider what is the likelihood of having to pay out to you, and is based on many factors including age, location, what you are insuring, and whether you have had any losses/accidents previously among many other things.

 

The premium (what you pay) is the rate or risk calculation, with any discounts, including no claims discount, applied.

 

 

So in the example of car insurance, an accident will increase the base calculation of your 'insurance' rate or risk.

Any discounts, no claims or otherwise, are then applied to the amount calculated.

 

Example:

Insurance before accident with NCD

= £200 (your risk calculation) - 40% of £200 no claims discount

= £200 - £80 = £120 to pay

 

Insurance after accident with protected NCD

= £400 (your increased risk calculation) - 40% of £400 protected no claims discount

= £400 - £160 = £240 to pay

 

Insurance after accident without protected NCD

= £400 (your increased risk calculation) - 0% of £400 no claims discount

= £400 - £0 = £400 to pay

 

 

Protected no claims discount protects the percentage of discount applied to the base risk calculation and is not protection from an increased basic risk calculation and hence increased cost of cover.

 

Hope this helps in understanding.

 

 

 

More info

http://www.confused.com/car-insurance/guides/how-car-insurance-is-calculated


I express my honestly held opinions - they are nothing more or less than that.

... Its just doing some due diligence that makes them seem unusual ...

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Also depends on whether accident is found to be fault or non fault. If you have a non fault accident, for which your Insurers have made a full recovery, you could still see a premium rise of say 20%. The Insurers have stats which show that once you have one accident, you have a bigger percentage risk of another accident.

 

The 20% increase is memory of the typical increase at renewal for a non fault accident, but it will vary.

 

People who are unhappy with the premium increases, can ask for a breakdown of how the premium has been calculated. This will usually detail the, gross premium, discounts and loadings applied.


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its called a no claim discount not a no blame discount hence the price rise

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its called a no claim discount not a no blame discount hence the price rise

 

The premium can go up even with no claim and no accident and even after an extra years NCD is added - because the basic risk has gone up for some other reason. ie Job or address has changed, or simply that the industry or company has decided to adjust the basic calculation.


I express my honestly held opinions - they are nothing more or less than that.

... Its just doing some due diligence that makes them seem unusual ...

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