THE TAXI INSURER: What effect does your no-claims bonus have on your insurance?

As the majority of drivers look for ways to save money on their taxi insurance, having seen increases in their premiums this year mainly driven by market conditions, one question we’re being asked is the value of a no- claims bonus.

Although a driver’s premium is influenced by their no-claims bonus, their total number of years of experience is also a factor. When they begin their career, a driver with zero experience and zero no-claims bonus will typically be paying in the region of £5,000 a year. A year later, if they are claims-free and have one year’s no-claims bonus, they are likely to receive 20%-30% discount on their renewal price. However, bearing in mind that prices have risen by 30% this year, that increase cancels out the effect of the no- claims bonus.

This is where experience comes into play. A driver with one year’s experience is a much lower risk than they were a year ago. Despite the insurance market’s recent price increases, the driver who was new to the taxi industry last year with zero no-claims bonus and a premium of £5,000 will this year be charged around half of that figure.

The no-claims bonus after year one is the biggest discount. Following that, drivers tend to receive a 10% increase in their no-claims bonus for each claims- free year with most insurers. Once drivers hit six years, their no-claims bonus discount has reached its peak.

OTHER FACTORS INFLUENCING PREMIUMS

The other factors influencing premiums are the car’s make and model, plus the rating of the driver’s address or their council. That information enables insurers to set a base price. The length of time the driver has held their driving licence also makes a difference.

In addition, insurers will consider whether the car is parked in a garage overnight; if it’s used by a single driver or several drivers; and any driving convictions or claims against a driver’s name. Only then is the no- claims discount applied.

PROTECTING YOUR NO- CLAIMS BONUS

Drivers do have the option of protecting their no-claims bonus, which generally costs about 10% of their annual premium. Customers can get confused by this feature. They often think that if they have a claim, their premium will remain the same, but that isn’t the case.

Protecting their no-claims bonus simply ensures that drivers won’t lose their no-claims discount in the event of a claim. For example, if a driver had a 60% discount last year and has a fault claim, they will still receive a 60% discount this year. But, at the same time, they remain subject to market conditions and adjustments, and insurance companies may still apply a possible loading for the fact that they’ve had a claim, so their premium could increase.

If the driver hadn't protected their no-claims bonus, they would have lost two years of the bonus due to their claim, so their bonus would have been reduced to 40%.

Most insurers give drivers the option of protecting their no-claims bonus once they've achieved five years of claims-free use of their vehicle. There are a few that do so from one year, although they tend to be more expensive.

Article wrote by industry expect David Sweeney from The Taxi Insurer.