Does MyLicence signal a new era for your no claims discount?

You may not know this, but your choice of insurer can seriously damage your no claims discount (NCD) entitlement. And that could be the case even if you never have an accident or never make a claim.
Motor insurance certificate with car key
Say you’d built up 15 years’ NCD with Aviva, for instance, but then you switched to Admiral at renewal after identifying a saving when shopping around at MoneySuperMarket. Your NCD entitlement would be slashed to just six years at your next renewal, even if you’d had a year of accident and claim-free driving. This is because each car insurance provider only gives you proof of NCD for the maximum number of years it recognises – there is no industry standard. So while Aviva acknowledges up to 15 years’ claim-free driving, Admiral recognises just  six. And it would get worse if you made a claim – you’d see your NCD cut by a further two years, meaning that 15 years could drop to just four.

No Can Do?

That lack of an industry standard is one of the main bugbears of the NCD, meaning each insurer offers a different level of discount and can pretty much make up the rules for its own customers. Which can, of course, cause strife when customers change insurer – as they legitimately do in search of a more competitive deal. For instance, a spokesperson for Churchill told us: “We offer an 80% discount as an introductory offer for new customers who have eight years or more NCD, and we continue to reward up to nine years’ NCD for existing customers who remain claim-free. “However, if a customer makes a claim and they have over five years’ NCD, this will be reduced to three years’ NCD after a first claim.” It’s no wonder NCD causes such confusion!

No Change Decided!

I spoke to both the Association of British Insurers (ABI) and the Motor Insurance Bureau (MIB) to see if any changes are planned to make the current system fairer for motorists. The bad news is there are no direct changes in the pipeline. Claims history forms an important part of the overall car insurance pricing structure adopted by each firm, and no claims discounts are used to attract and retain customers for annual policies. But there is some good news. The MIB’s new digital information database, MyLicence (which houses data such as your licence details, convictions and penalty points) aims to make the whole car insurance industry more transparent, and that will include the provision of NCD.

MyLicence: Noting Conviction Details

The MIB has introduced MyLicence to enable insurers to offer policies based on facts rather than relying solely on driver declarations. The database will be fed with information from the DVLA, and relies on drivers giving their licence numbers on their proposal forms. It’s designed to tackle the problem that almost a quarter of British motorists (23%) fail to accurately disclose their driving record, including declaration of any driving disqualifications. You don’t have to give your licence number – but the MIB thinks some insurers might charge higher premiums if you don’t. And insists honest drivers have nothing to fear from the system.

New Company Data

MyLicence will also help address the problem of NCD provision by recording the last two years’ data. Say your insurer, Company A, recorded your having 15 years’ NCD in 2014. Then, in 2015, you switched to Company B, which reduced it to six years (without a claim being made). Come renewal time in 2016, if you switched again and had still not made a claim, your new insurer – Company C – would be able to see your history, and give you full credit for your lengthy claims-free driving record. Provided, of course, Company C offered more generous terms than Company B! All of which goes to further strengthen the case for shopping around at renewal instead of sticking with the same insurer and auto-renewing.

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