TL;DR
Protecting your No Claims Discount (NCD) is crucial for managing private medical insurance costs in the UK. At WeCovr, an FCA-authorised broker that has helped arrange over 900,000 policies of various kinds, we demystify NCDs to ensure you get maximum value from your health cover. This guide explains how they work and how to keep your premiums low.
Key takeaways
- To reward policyholders: It provides a direct financial incentive for members who don't claim, making their loyalty and good health valuable.
- To manage insurer costs: It encourages policyholders to think carefully before making a claim for minor issues, which helps keep the overall cost of claims down for the insurer. This, in turn, helps to keep premiums more stable for everyone in the long run.
- Pre-existing conditions: Any medical condition you had before your policy began.
- Chronic conditions: Conditions that are long-lasting and cannot be cured, such as diabetes, asthma, or high blood pressure. These are managed by the NHS.
- Specialist consultations
Protecting your No Claims Discount (NCD) is crucial for managing private medical insurance costs in the UK. At WeCovr, an FCA-authorised broker that has helped arrange over 900,000 policies of various kinds, we demystify NCDs to ensure you get maximum value from your health cover. This guide explains how they work and how to keep your premiums low.
Reward structures, maximum discounts, and tips to build up your NCD
A No Claims Discount is one of the most significant factors influencing the price of your private medical insurance (PMI) premium year after year. Think of it as a loyalty reward from your insurer for staying healthy and not making a claim. The longer you go without claiming, the larger your discount becomes, potentially slashing your renewal price by up to 75%.
However, a single claim can cause this carefully built discount to tumble, leading to a sharp increase in your premium. Understanding how these reward structures work, what the maximum discounts are, and how you can protect your NCD is essential for making your private health cover sustainable in the long term. This article will walk you through everything you need to know.
What is a No Claims Discount (NCD) in Private Health Insurance?
A No Claims Discount on a private health insurance policy is a percentage discount applied to your premium at renewal if you haven't made a claim during the previous policy year. It functions very similarly to the NCD system used in car insurance, which most people are familiar with.
The core purpose of an NCD is twofold:
- To reward policyholders: It provides a direct financial incentive for members who don't claim, making their loyalty and good health valuable.
- To manage insurer costs: It encourages policyholders to think carefully before making a claim for minor issues, which helps keep the overall cost of claims down for the insurer. This, in turn, helps to keep premiums more stable for everyone in the long run.
Most major UK private health insurance providers, including AXA Health, Bupa, and The Exeter, use an NCD scale. Each year you don't claim, you move up a level on the scale, and your discount increases. If you do claim, you typically move down a few levels, and your discount reduces.
A Critical Note on PMI Coverage
It is vital to understand that standard UK private medical insurance is designed to cover acute conditions that arise after you have taken out your policy. An acute condition is a disease, illness, or injury that is likely to respond quickly to treatment and lead to a full recovery.
PMI does not cover:
- Pre-existing conditions: Any medical condition you had before your policy began.
- Chronic conditions: Conditions that are long-lasting and cannot be cured, such as diabetes, asthma, or high blood pressure. These are managed by the NHS.
Understanding this distinction is key to using your policy correctly and protecting your NCD.
How Do Insurers Calculate Your No Claims Discount?
Insurers use a "ladder" or tiered system to calculate your NCD. When you first take out a policy, you start at the bottom of the ladder, usually with a 0% discount. For every consecutive year you hold the policy without making a claim, you climb one step up the ladder.
What counts as a "claim" can vary slightly between insurers, but it generally refers to any instance where the insurer has to pay for your private treatment. This includes:
- Specialist consultations
- Diagnostic tests (like MRI or CT scans)
- Out-patient procedures
- In-patient or day-patient surgery and hospital stays
Making a claim will typically cause you to move down the ladder at your next renewal, usually by two or three levels.
Here is an example of what a typical NCD ladder might look like. Please note that the exact percentages and levels vary by insurer.
| Level | Years Without a Claim | NCD Percentage |
|---|---|---|
| 14 | 14+ | 75% (Maximum) |
| 13 | 13 | 72.5% |
| 12 | 12 | 70% |
| 11 | 11 | 65% |
| 10 | 10 | 60% |
| 9 | 9 | 55% |
| 8 | 8 | 50% |
| 7 | 7 | 45% |
| 6 | 6 | 40% |
| 5 | 5 | 35% |
| 4 | 4 | 25% |
| 3 | 3 | 15% |
| 2 | 2 | 10% |
| 1 | 1 | 5% |
| 0 | 0 (New Policy) | 0% |
Example: If you are on Level 10 with a 60% discount and you make a claim, your insurer might move you down three levels at renewal. You would drop to Level 7, and your discount would reduce from 60% to 45%. This would result in a significant premium increase, even before factoring in other price adjustments like age and medical inflation.
Understanding the Maximum No Claims Discount
The maximum NCD you can achieve is a key feature to compare when choosing a provider. A higher maximum discount means greater potential for long-term savings. Most UK providers cap their NCDs at between 65% and 75%.
Reaching this maximum level is a long-term commitment, often taking more than a decade of continuous cover without any claims.
Here's how some of the major UK PMI providers' maximum NCDs compare (these figures are indicative and can change, so always check the latest details).
| Provider | Maximum NCD (Approximate) | Time to Reach Max NCD (Approx.) |
|---|---|---|
| AXA Health | 75% | 15 years |
| Bupa | 70% | 14 years |
| The Exeter | 65% | 8 years |
| Aviva | 75% | 16 years |
While a provider offering a 75% maximum discount looks attractive, it's also worth considering how quickly you can build up a meaningful discount. The Exeter, for example, allows you to reach its maximum of 65% in just 8 years, which is significantly faster than many competitors. An expert PMI broker like WeCovr can help you weigh these different factors to find the policy that best suits your long-term financial planning.
NCD Protection: Is It Worth the Extra Cost?
Given how valuable a high NCD is, many insurers offer "NCD Protection" as an optional add-on to your policy, for an additional fee.
No Claims Discount Protection allows you to make a certain number of claims within a policy year (usually one, sometimes more) without it negatively affecting your discount level at renewal. Essentially, you are insuring your discount.
Pros and Cons of NCD Protection
| Pros of NCD Protection | Cons of NCD Protection |
|---|---|
| Peace of Mind: You can claim when you need to without fearing a huge premium hike. | Additional Cost: You pay an extra premium for this benefit, whether you use it or not. |
| Budget Predictability: Helps to avoid unexpected spikes in your renewal price. | May Not Be Necessary: If you don't claim, you've paid for a benefit you haven't used. |
| Protects High Discounts: Especially valuable if you've spent 10+ years building a 70% or 75% NCD. | Claim Limits: Some protection only covers one claim, and a second claim in the same year will still reduce your NCD. |
| Cost-Effective for Major Claims: The extra cost of protection is often far less than the premium increase from losing a large NCD. | Can Encourage Over-claiming: May reduce the incentive to self-fund minor treatments. |
So, is it worth it?
NCD protection is most beneficial for those who:
- Have already built up a high NCD (e.g., over 50%).
- Want to ensure their premiums remain as stable as possible.
- Are concerned about the potential need for treatment in the near future.
If you have a low NCD or are a new policyholder, the extra cost may not be justified. You can always choose to add it later once you have built up a more substantial discount to protect.
Alternative Reward Structures: Beyond the NCD
While the NCD model is the most common reward structure in the UK PMI market, it's not the only one. Some innovative insurers have developed different ways to reward their members.
Vitality's Active Rewards Programme
Vitality is the most prominent example of an alternative approach. Instead of a traditional NCD, Vitality uses a points-based system linked to healthy living. Members are encouraged to track their physical activity, complete health checks, and engage in wellness activities.
How it works:
- Earn Points: You earn Vitality points for activities like walking, running, going to the gym, and getting health screenings.
- Improve Your Status: The more points you earn, the higher your Vitality Status (from Bronze to Silver, Gold, and finally Platinum).
- Get Rewarded: Your status at the end of the policy year directly influences your renewal premium. A higher status can lead to significant discounts (or limit price increases), regardless of whether you have claimed.
This model incentivises proactive health management rather than simply rewarding the absence of claims. For people who are already active or are motivated to improve their health, this can be a very appealing and engaging alternative to a standard NCD.
Top 10 Tips for Building and Protecting Your NCD
Whether your policy uses a traditional NCD or a different reward structure, the goal is the same: to keep your premiums as low as possible without compromising your access to care. Here are our top tips to help you achieve that.
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Use Your Policy’s 'Free' Benefits Most modern PMI policies come with a suite of value-added benefits that you can use without it counting as a claim and affecting your NCD. These often include:
- Virtual GP Services: 24/7 access to a GP via phone or video call. This is perfect for initial advice, diagnoses, and prescriptions for simple issues.
- Health Information Lines: Access to nurses for medical advice.
- Mental Health Support: Telephone-based counselling or support for stress, anxiety, and other concerns.
- Wellness Apps and Discounts: Access to gym discounts, health trackers, and lifestyle reward programmes.
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Consider Self-Funding Minor Treatments If you need a one-off consultation with a specialist that costs, say, £250, think before you claim. If you have a 70% NCD on a £2,000 premium, your discount is worth £1,400. Losing three levels on the NCD ladder could reduce your discount to 50% (£1,000). This would mean your premium increases by £400 at renewal. In this case, paying the £250 yourself is the more financially prudent long-term decision.
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Make Full Use of the NHS Having private medical insurance doesn't mean you must bypass the NHS for everything. The NHS remains a comprehensive service available to all UK residents. For many initial diagnostics or non-urgent issues, your NHS GP is the right first port of call. According to NHS England data, while waiting lists for elective treatment remain high (around 7.5 million cases in mid-2024), the NHS is still highly effective for urgent care and managing long-term conditions.
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Choose the Right Excess Level An excess is a fixed amount you agree to pay towards the cost of any claim. For example, if you have a £250 excess and your treatment costs £2,000, you pay the first £250 and your insurer pays the remaining £1,750. Choosing a higher excess will lower your base premium. This can be a more reliable way to manage costs than solely relying on your NCD, as the saving is guaranteed every year.
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Review Your Policy Annually with a Broker The health insurance market is constantly changing. A policy that was the best value three years ago might not be today. An annual review with an independent broker like WeCovr is crucial. We can:
- Compare your renewal offer against the rest of the market.
- Advise if switching providers could offer a better deal.
- Negotiate with insurers on your behalf.
- Ensure your cover still matches your needs. WeCovr has extensive experience and enjoys high customer satisfaction ratings, helping you navigate these decisions at no extra cost to you.
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Embrace a Healthy Lifestyle This is the most proactive way to protect your health and your NCD. Fewer health problems mean fewer claims.
- Diet: A balanced diet rich in fruits, vegetables, and whole grains can reduce your risk of developing many acute conditions. As a WeCovr client, you get complimentary access to our AI-powered nutrition app, CalorieHero, to help you track your diet and make healthier choices.
- Exercise: The NHS recommends at least 150 minutes of moderate-intensity activity a week. Regular exercise boosts your immune system, strengthens your heart, and improves mental wellbeing.
- Sleep: Aim for 7-9 hours of quality sleep per night. Good sleep is vital for physical and mental recovery and a strong immune response.
- Stress Management: Chronic stress can lead to a host of health issues. Practice mindfulness, yoga, or hobbies to keep stress levels in check.
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Understand Your Policy's Claim Process Before you need to make a claim, read your policy documents and understand the process. Do you need a GP referral? Do you have to call the insurer for pre-authorisation? Knowing the steps in advance prevents stress and ensures your claim is handled smoothly.
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Ask Before You Claim If you think you might need to use your policy, your first call should be to your insurer or broker's dedicated claims line. They can provide guidance on:
- Whether the condition is likely to be covered.
- The exact impact a claim would have on your NCD.
- Alternative options you might not have considered.
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Group Small Claims Together Some insurers treat all treatment for a single condition within one policy year as a single claim. For example, if you have a consultation, a scan, and then a follow-up for the same muscle injury, this may only count as one claim. Check your insurer's policy on this, as it can be a way to minimise the impact on your NCD.
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Consider NCD Protection (At the Right Time) As mentioned earlier, once your NCD reaches a significant level (e.g., 50% or more), paying extra for NCD protection can be a very wise investment. The cost of protecting a £1,500 discount is almost always less than the premium increase you'd face if you lost it.
Switching Insurers: Can I Take My NCD With Me?
One of the most common questions we hear is, "If I switch to a new insurer, will I lose my NCD?"
The good news is that many UK insurers are willing to honour or match the No Claims Discount you have earned with your previous provider. They do this because a long-standing NCD is a clear sign that you are a low-risk customer.
However, this is not guaranteed and is a key area where a broker's expertise is invaluable. The process typically involves:
- Providing your renewal notice from your current insurer, which clearly states your NCD level.
- Choosing the right underwriting terms for the switch, usually "Continued Medical Exclusions" (CME), which ensures continuity of cover.
An experienced broker can advise which insurers are most likely to offer a favourable NCD transfer and can handle the paperwork to ensure a seamless transition.
The Role of an Expert Broker in Managing Your NCD
Navigating NCD scales, protection options, and alternative reward structures can be complex. This is where an independent, FCA-authorised broker like WeCovr becomes an indispensable partner.
Our service is provided at no cost to you, as we are paid a commission by the insurer you choose. Our role is to act in your best interests, providing impartial advice to help you:
- Compare the Whole Market: We analyse NCD structures, maximum discounts, and NCD protection options from all leading UK providers to find the best fit for you.
- Conduct Annual Reviews: We proactively contact you before your renewal to assess your new premium and check if a better deal is available elsewhere, taking your NCD into account.
- Provide Claims Guidance: We can offer impartial advice on the financial implications of making a claim versus self-funding, helping you protect your hard-earned discount.
- Manage Switching: If you decide to switch providers, we handle the entire process, including negotiating the transfer of your NCD.
- Unlock Extra Value: When you purchase a Private Medical or Life Insurance policy through WeCovr, you may also be eligible for discounts on other types of cover, creating even more savings.
With high customer satisfaction ratings and a commitment to clear, honest advice, WeCovr is dedicated to making private health insurance work for you.
Do all private health insurance policies have a No Claims Discount?
Can my insurer increase my premium even if I haven't claimed?
Is it better to have a high excess or rely on my NCD to keep costs down?
What happens to my NCD if I add my partner or children to my policy?
Ready to find a private medical insurance policy that rewards you for staying healthy? Get your free, no-obligation quote from WeCovr today. Our experts will compare the market to find the perfect cover for your needs and budget.
