Smart Money - Sam Richardson: How can my car insurance shoot up when I’ve still got my no-claims bonus?

Question: I had a car accident in October 2021, which wasn’t my fault. An elderly gentleman crashed into the side of me. My car insurer, NFU Mutual, settled the claim of £2,000, as the car was a write-off, and confirmed that my no-claims discount wasn’t affected. I bought a similar car but when my car insurance renewal arrived the premium had increased from £288 to £684. Is this right?

Answer: A no-claims bonus – also known as a no-claims discount – is a percentage discount that your insurer takes off your insurance premium to reward you for not claiming on your insurance.

Suppose, for instance, you had a no-claims bonus of 30 per cent, you’d pay £700 where you would otherwise have paid £1,000.

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For each consecutive year that you’ve not claimed (or haven’t made a claim that affects the discount), the discount increases. So your insurer might award you 30 per cent for one year without claims, but five claims-free years under your belt might net you 60 per cent.

Haggling over your car insurance can feel daunting but insurers remain receptive to it – and in many cases expect itHaggling over your car insurance can feel daunting but insurers remain receptive to it – and in many cases expect it
Haggling over your car insurance can feel daunting but insurers remain receptive to it – and in many cases expect it

Some insurers will make a point of awarding generous no-claims bonuses in their marketing, but it's important to compare the final quote – with any discounts included – to determine which is the best deal.

So why did your premium go up if your bonus didn’t go down? Well, the catch with no-claims bonuses is that, while they shield you from the full amount you’d otherwise be charged, they don’t prevent that premium (and therefore the discounted amount you pay) from increasing.

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This doesn’t explain what actually pushed the price up, though. There could be several reasons – and insurers tend to be secretive about how they’ve put together your price. However, the following two factors may have played a role.

Even though you weren’t to blame for your collision, broadly speaking, insurers consider drivers that have recently been involved in an accident to be of higher risk than drivers who haven’t – and this is reflected in their premium. Fortunately, this effect reduces over time.

Secondly, car insurance premiums have more generally been on the rise. They were at a seven-year low at the beginning of this year, according to the Association of British Insurers, but claims inflation (rises of costs in repairing and replacing cars) have since begun pushing them up, meaning that customers renewing now may be facing an unwelcome surprise.

Indeed, a recent Which? investigation found that around half of Which? members with car insurance saw their premium go up in the first half of this year.

Fortunately, it’s not all bad news. If you aren’t satisfied with the price you’ve been given at renewal by your insurer, it remains well worth your while to shop around elsewhere. Check comparison sites to see if there are more competitive deals with satisfactory cover. If there are, you should consider switching. Which? members surveyed this summer that had switched insurer last renewal (without haggling) paid, on average, £43 less than those who stayed put.

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If you’re generally happy with your current provider, though, then haggling is your best bet. It’s age-old consumer advice, but it works. When Which? asked its members whether negotiating had yielded lower premiums, half of those who tried to haggle reported success. Indeed, the average reduction in premiums was £56 – a decent saving at a time when the cost-of-living crisis is squeezing household budgets tightly.

Haggling can feel daunting, especially if you haven’t done it before. But insurers remain receptive to it – in many cases they expect customers to try it. It pays to be prepared before calling your insurer, so gather quotes from rival insurers beforehand. The first question you should be asking, though, is why the premiums have gone up by so much. If they can’t give a satisfactory reason, point them in the direction of other insurers whose premiums haven’t risen by so much, and see whether they climb down. If they don’t, it’s time to switch.

Sam Richardson is deputy editor of Which? Money

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