Will MyLicence end ‘proof of no claims discount’ nightmare?

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Updated August 7, 2015

We first published this article back in December 2014, and since then we've had some questions regarding the My Licence scheme and it seems there's still some confusion about what it's all about and what it means for motorists. Here is a selection of the questions we received, along with answers from the MIB... Do consumers need to register/sign-up or will the data automatically be made available via DVLA and insurance records? There are no requirements for customers to register to use the service. Registration should occur at the insurer level. The customer is only required to provide their driving licence number. It is the job of the quote engine, or the data capture mechanism, to source the DVLA data package through a data enrichment type mechanism. Do businesses need to sign up and is this something a price-comparison website like Money Supermarket should be doing or considering? MyLicence is already being used by about 18% of the motor insurance market. This represents a relatively high take-up in a short period of time and, given the clear benefits to consumers and insurers alike, we encourage the aggregators to adopt the programme as soon as possible. What are the benefits of MyLicence? Use of Mylicence is key in achieving ABC for the insurance industry through the provision of good quality data at the point of quote, sale and claim.

  • Accurate pricing is achieved because the customer’s memory is no longer relied on and the ability for the customer to misrepresent their driving history is removed.
  • Better Customer Experience is provided because the data used to underwrite the risk is accurate at the quote stage. This enables insurance practitioners to reduce their questions sets by ceasing to request driving licence information from their customers. This also means that scrutiny of the data is reduced at the claims stage so that claims can be dealt with quicker.
  • Combatting fraud is a further benefit achieved because consumers cannot understate their endorsements deliberately or accidentally. Reduced fraud cuts costs to consumers and insurers alike.

What is MyLicence?

The Motor Insurance Bureau (MIB) and Driver Vehicle Licensing Agency (DVLA) have joined forces to deliver MyLicence. The scheme is designed to reduce car insurance fraud, which helps add £50 to the amount spent by honest households on insurance every year, according to the Association of British Insurers.

And while this will undoubtedly be music to the ears of honest motorists everywhere, what might make for an even sweeter sound is the plan to do away with the need for motorists to keep and send a hard copy of their proof of no claims discount (NCD). This part of the scheme isn’t due to go live until next year though, so before we look into that, let’s see how MyLicence is currently working for insurers and honest motorists alike.

Why do we need MyLicence?

Recent DVLA statistics reveal almost a quarter of motorists (23%) fail to accurately disclose their driving record, including declaration of any driving disqualifications. And while 16% of policyholders under-declare convictions, 7% somehow manage to over-declare, both of which would invalidate their car insurance. So the MyLicence scheme has been introduced to enable insurers to offer policies based on facts rather than relying solely on driver declaration.

Cross referencing

It does this by using each motorists driver licence number (DLN) to cross-reference the details held by insurers with that held by the DVLA to confirm driving entitlements, endorsements and penalty points. This means insurers will be better equipped to assess quotes, determine risk levels and provide insurance at an appropriate and accurate price without having to rely so heavily on assumptions and declarations. The scheme has been a work in progress since 2010 and is just another step in the ongoing process to digitise the data held by the DVLA and other motoring organisations, a process which should benefit motorists and insurers alike.

Honesty the best policy

Huw Evans, Director of Policy and Deputy Director General, Association of British Insurers (ABI), said: “MyLicence is good news for honest motorists. It will speed up the application process, help insurers, brokers and comparison websites to better identify potential frauds, and keep motor insurance premiums as competitively priced as possible.” And if this can help cut the rising cost of car insurance then it should be welcomed by honest motorists the land over. As should the plans to do away with having to get a hard copy of proof of NCD – but in reality this could just open up a whole can of worms…

‘Proof of NCD’ strife

It’s well over a year since we published Get proof of your no claims discount and we still get loads of comments from motorists who are struggling to obtain proof of NCD from their previous insurers. In some instances motorists are even having their current policy cancelled because they can’t provide proof of NCD to their current insurers. And so the plans to do away with the need for hard copies of proof of NCD will solve this particular headache. But it could also blow the doors wide open on the inconsistent allocation of NCD among insurers.

Entitlement issues

How come? Well, if your new insurer only recognises a maximum of five years’ NCD, then you’ll only be able to have five years’ NCD on your next policy. So even if you had say, nine years’ NCD under the old policy, if your current insurer only recognises five years, you’ll instantly lose four years’ entitlement. And it gets worse if you make a claim and, as is usually the case, lose two years’ NCD. You’d then see your entitlement fall from nine years to just three, which would come as a nasty surprise if you were expecting to go into your next renewal armed with seven years’ NCD.

Industry standard

We asked the MIB and the ABI whether an industry standard would be introduced for NCD allocation. They said there are no plans to do so as claims history forms an important part of the overall pricing structure, and no claims discounts are regularly used to attract and retain customers for annual policies.

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