Many insurers offer consumers a no-claims bonus if they make no claims against their policy for a specified period of time. Unsurprisingly, the prospect of this financial reward is attractive to consumers, so much so that many choose not to claim from their insurance to avoid losing the cash-back reward or discount on their insurance premiums in years to follow.
This is particularly true in the case of third-party claims, where consumers feel someone else is responsible for an accident.
However, holding out on placing a claim with your insurer is often financially detrimental in the long run, says Chris Barry, managing director of Heavy Commercial Vehicle Underwriting Managers (HCV). He warns that many consumers are at risk because they do not fully understand the implications of not claiming from their insurers.
“An insurance policy is a contract between a consumer and their insurer that provides the consumer with certain rights. By paying a monthly premium, consumers are contracting their insurer to provide professional services including management of the claims process, protecting their rights and negotiating with other insurers on their behalf,” explains Barry.
“When consumers decide against claiming through their own insurance and instead, in their private capacity, approach the insurer of the person or company ‘responsible’ for the accident, they are not protected by contractual law because their contract is with their own insurer.”
Barry believes that the ‘no-claims bonus’ has created an environment in which consumers pay for services they are then discouraged from using.
“Settling claims is a complex, admin-intensive negotiation process that consumers are not equipped to manage on their own – that is partly why they should retain an insurance company. A no-claims bonus is a marketing tool that ultimately does consumers a disservice because in the event of an accident, they are without the support of their insurance company when it is needed most.”
Does it really matter if consumers decide against claiming to protect their no-claim bonus? Barry believes that doing so places other drivers and the insurance industry at risk.
“After an accident, consumers may drive in unrepaired vehicles that aren’t roadworthy while they attempt to settle their claims – this endangers other road users. The impact on the insurance industry is significant too. There an emotional impact on employees dealing with consumers who aren’t their clients. Conflict between consumers and insurers brings the whole industry into disrepute.
For the promise of a no-claims bonus it is the individual consumer who suffers most, in terms of time, frustration and lack of legal representation, says Barry. He points out that the Insurance Ombudsman has no jurisdiction over third-party claims.
“The Insurance Ombudsman will investigate consumer complaints against their own insurer – again, an insurer only has an obligation to their own policy-holders,” he says.
Ultimately, no insurance policy should be purchased on the basis of a no-claims bonus. In fact, consumers should consider asking for a cost-comparison to determine their premium without a no-claim bonus.