TL;DR
As an FCA-authorised broker that has helped arrange over 900,000 policies, WeCovr understands that No Claims Discounts (NCDs) are a key factor in managing the cost of private medical insurance in the UK. This comprehensive guide breaks down exactly how they work, helping you make smarter choices about your cover. WeCovr explains how NCDs work in PMI and how to protect them Navigating the world of private medical insurance (PMI) can feel complex, with various terms and conditions to understand.
Key takeaways
- What an NCD is and how the discount 'ladder' works.
- The crucial differences between NCDs in health and car insurance.
- What constitutes a 'claim' that will impact your discount.
- Whether you should protect your NCD.
- How to switch insurers without losing your hard-earned discount.
As an FCA-authorised broker that has helped arrange over 900,000 policies, WeCovr understands that No Claims Discounts (NCDs) are a key factor in managing the cost of private medical insurance in the UK. This comprehensive guide breaks down exactly how they work, helping you make smarter choices about your cover.
WeCovr explains how NCDs work in PMI and how to protect them
Navigating the world of private medical insurance (PMI) can feel complex, with various terms and conditions to understand. One of the most significant concepts affecting your annual premium is the No Claims Discount, or NCD.
Similar to the system used in car insurance, a health insurance NCD is designed to reward you for not making a claim on your policy. For every year you remain a member without claiming, you earn a discount that reduces your premium at renewal. However, the mechanics of a PMI NCD are quite different from what you might be used to with your car policy.
This article will guide you through:
- What an NCD is and how the discount 'ladder' works.
- The crucial differences between NCDs in health and car insurance.
- What constitutes a 'claim' that will impact your discount.
- Whether you should protect your NCD.
- How to switch insurers without losing your hard-earned discount.
Understanding these points is vital for controlling your long-term health insurance costs and ensuring you get the best value from your cover.
A Critical Note on UK Private Medical Insurance
Before we dive in, it's essential to understand a fundamental principle of standard UK private medical insurance: PMI is designed to cover acute conditions that arise after you take 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.
Standard PMI policies do not cover pre-existing conditions (ailments you had before the policy started) or chronic conditions (illnesses that are long-term and cannot be cured, like diabetes, asthma, or high blood pressure). Management of these conditions remains with our excellent NHS.
What is a No Claims Discount (NCD) in Health Insurance?
A No Claims Discount is a percentage reduction applied to your private medical insurance premium. It's a reward from your insurer for each consecutive year you hold the policy without making a claim for treatment.
The longer you go without claiming, the higher your discount becomes, up to a maximum level set by the insurer. This system incentivises policyholders to manage their claims carefully and, where appropriate, consider self-funding minor treatments to preserve their discount.
Think of it as a loyalty bonus for good health and careful use of your policy. It's one of the most significant factors you can influence to keep your future premiums as low as possible.
How Does a Health Insurance No Claims Discount Work?
Insurers use a "ladder" or "scale" system to manage NCDs. Every policyholder is placed on a specific level of this ladder, with each level corresponding to a certain discount percentage.
When you first take out a policy, you typically start at the bottom of the ladder, often with a 0% discount.
- If you don't claim: At your policy renewal, you move up one level on the ladder, and your discount increases.
- If you do claim: At renewal, you will move down the ladder, usually by two or three levels, and your discount will decrease.
This process continues each year. If you reach the top of the ladder, you'll enjoy the maximum NCD offered by your provider, which can be as high as 70-80% with some insurers.
Example of a Typical NCD Ladder
While each insurer's NCD scale is slightly different, they follow a similar structure. Here is a representative example to illustrate how it works:
| NCD Level | Years Without a Claim | Discount Percentage |
|---|---|---|
| 10 | 10+ Years | 70% |
| 9 | 9 Years | 65% |
| 8 | 8 Years | 60% |
| 7 | 7 Years | 55% |
| 6 | 6 Years | 50% |
| 5 | 5 Years | 40% |
| 4 | 4 Years | 30% |
| 3 | 3 Years | 20% |
| 2 | 2 Years | 10% |
| 1 | New Policy / 1 Year | 0% |
Let's use a real-life example:
Meet David: David takes out a new PMI policy with a base premium of £1,500.
- Year 1: He is on Level 1 with a 0% NCD. He pays the full £1,500. He doesn't make any claims.
- Year 2 Renewal: He moves up to Level 2, gaining a 10% NCD. His base premium might have increased slightly due to age and medical inflation (we'll cover this next), but for simplicity, let's assume the base is still £1,500. He now pays £1,500 - 10% = £1,350.
- Years 3-6: David continues not to claim and moves up the ladder, his discount growing each year.
- Year 7: David is now on Level 7 with a 55% NCD. He needs physiotherapy for a sports injury and makes a claim.
- Year 8 Renewal: Because he claimed, he drops down the ladder. If the insurer's rule is to drop three levels for a claim, he would move from Level 7 (55%) down to Level 4 (30%). His discount is significantly reduced.
This simple example shows the powerful impact that claiming, or not claiming, has on your annual costs.
The Crucial Difference: Health Insurance NCDs vs. Car Insurance NCDs
This is one of the most misunderstood aspects of private medical insurance. While the name is the same, the effect of an NCD on your final premium is very different compared to car insurance.
With car insurance, your premium is influenced by your age, car, and location, but a large NCD can often lead to a lower premium year-on-year if nothing else changes.
With health insurance, two other powerful factors are always at play:
- Your Age: As we get older, the statistical likelihood of needing medical treatment increases. Therefore, your base premium will automatically go up each year on your birthday.
- Medical Inflation: The cost of private medical care—including new drugs, advanced diagnostic technologies, and hospital fees—consistently rises faster than general inflation (the Consumer Price Index). Insurers pass this cost on through premiums. In recent years, medical inflation has often been in the range of 5-10% annually.
This means that even if you have the maximum NCD, your health insurance premium will almost certainly increase every year.
The NCD helps to offset these inevitable increases, but it rarely eliminates them entirely.
How NCDs and Premium Increases Interact
Let's illustrate this critical point. Imagine your base premium is £2,000.
| Year | NCD Level | NCD % | Age/Inflation Increase | Base Premium | NCD Discount | Final Premium Paid |
|---|---|---|---|---|---|---|
| 1 | 1 | 0% | - | £2,000 | £0 | £2,000 |
| 2 | 2 | 10% | +8% | £2,160 | £216 | £1,944 (Goes down) |
| 3 | 3 | 20% | +8% | £2,333 | £467 | £1,866 (Goes down) |
| 4 | 4 | 30% | +8% | £2,520 | £756 | £1,764 (Goes down) |
| 5 | 5 | 40% | +8% | £2,721 | £1,088 | £1,633 (Goes down) |
| 6 | 6 (Max) | 50% | +8% | £2,939 | £1,470 | £1,469 (Goes down) |
| 7 | 6 (Max) | 50% | +8% | £3,174 | £1,587 | £1,587 (Goes up!) |
| 8 | 6 (Max) | 50% | +8% | £3,428 | £1,714 | £1,714 (Goes up) |
As you can see, in the early years, the growing NCD is powerful enough to make your premium fall. But once you reach the maximum NCD, the annual increases from age and medical inflation take over, and your premium starts to climb again.
This is normal and should be expected. An expert PMI broker, like WeCovr, can help you review your policy each year to ensure it still offers the best value.
What Counts as a 'Claim' That Affects Your NCD?
A common fear among policyholders is that any interaction with their insurer will be treated as a claim and ruin their discount. Thankfully, this is not the case.
Insurers want you to be healthy and engaged with their services. To encourage this, many of the 'value-added' benefits included in modern PMI policies are often 'NCD-friendly' and can be used without affecting your discount.
Activities That Usually DO Affect Your NCD
A 'claim' is typically defined as using your policy to pay for private medical treatment. This includes:
- Consultations with a specialist.
- Diagnostic tests (e.g., MRI scans, CT scans, blood tests).
- In-patient or day-patient hospital treatment (e.g., surgery).
- Out-patient therapies (e.g., physiotherapy, osteopathy).
- Cancer treatment (e.g., chemotherapy, radiotherapy).
Essentially, if the insurer pays a medical bill on your behalf, it will almost certainly count as a claim and cause you to move down the NCD ladder at renewal.
Services That Usually DO NOT Affect Your NCD
Most modern health insurance policies come with a suite of extra benefits designed to support your wellbeing and provide quick access to medical advice. Using these is generally not considered a claim. These can include:
- Digital/Virtual GP Services: 24/7 access to a GP via phone or video call.
- Health and Wellbeing Apps: Access to fitness trackers, mental health support, and lifestyle advice. WeCovr even provides complimentary access to our partner AI calorie tracking app, CalorieHero, for our PMI customers.
- Mental Health Support Lines: Confidential helplines for stress, anxiety, and other concerns.
- Medical Advice Helplines: Access to nurses for non-emergency medical questions.
- Cash Benefits: Some policies offer a small cash payment for each night you spend in an NHS hospital. This is often excluded from the NCD calculation.
- Rewards for Healthy Living: Some providers, like Vitality, have extensive wellness programmes that reward you for being active. Engaging with these does not count as a claim.
Important: The exact list of services that don't affect your NCD varies between insurers and policies. Always read your policy documents or ask your broker to confirm before using a service if you are unsure.
To Claim or Not to Claim? A Practical Guide
This is the million-dollar question. If you need minor treatment, should you use your expensive private medical insurance and risk a premium hike, or should you pay for it yourself?
There's no single right answer, as it depends on your financial situation and the cost of the treatment. However, you can make an informed decision by doing a simple cost-benefit analysis.
The Calculation:
- Find out the cost: Ask the hospital or clinic for the 'self-pay' price of the consultation or treatment.
- Estimate the premium impact: Ask your insurer or broker how a claim would affect your NCD and what the likely impact on next year's premium would be. Remember to factor in your policy excess.
- Compare the costs: Is the one-off cost of paying for it yourself less than the cumulative increase in your premiums over the next few years?
Let's run through an example:
Meet Sarah: She has a PMI policy with a base premium of £1,800.
- She is on NCD Level 8 (60% discount).
- Her current premium is £1,800 - 60% = £720.
- She has a policy excess of £250.
Sarah needs a consultation with a dermatologist (£250) and a minor procedure to remove a mole (£550). The total cost is £800.
Option 1: Claim on her insurance.
- She pays her £250 excess.
- The insurer pays the remaining £550.
- At renewal, she drops three NCD levels, from Level 8 (60%) to Level 5 (40%).
- Her base premium also rises by 8% for age/inflation to £1,944.
- Her new premium will be £1,944 - 40% = £1,166.40.
- The premium increase directly due to the claim is £446.40 for the next year alone. This increase will continue to have a knock-on effect for several years as she rebuilds her NCD.
Option 2: Pay for it herself (self-fund).
- She pays the full £800 out of pocket.
- She does not claim, so at renewal, she moves up one NCD level to Level 9 (65%).
- Her new premium will be £1,944 - 65% = £680.40.
The Verdict: By claiming, Sarah saves paying £550 upfront (as she has to pay the £250 excess anyway) but faces a premium hike of at least £446 in the first year. By self-funding, she pays £800 upfront but her premium actually decreases next year. In this scenario, self-funding appears to be the more financially prudent long-term decision.
For major surgery costing tens of thousands of pounds, the calculation is obvious: you claim. For smaller costs, it's a grey area. An independent broker like WeCovr can provide impartial advice to help you weigh the options.
Protecting Your No Claims Discount: Is It Worth It?
Just like with car insurance, most PMI providers offer the option to "protect" your NCD for an additional fee.
NCD Protection is an add-on to your policy that allows you to make a certain number of claims (usually one, sometimes two) within a policy year without it resulting in a reduction of your NCD level.
If you make a claim while your NCD is protected:
- You will not drop down the NCD ladder.
- However, you will also not move up the ladder at renewal. You typically stay on the same level for the following year.
Pros and Cons of NCD Protection
| Pros of NCD Protection | Cons of NCD Protection |
|---|---|
| Peace of Mind: You can claim without fear of a huge premium hike. | It Costs Extra: You are paying more for a benefit you may never use. |
| Financial Predictability: Helps to stabilise your renewal premium. | It Doesn't Freeze Your Premium: Your premium will still rise due to age and medical inflation. |
| Protects High Discounts: Especially valuable if you have a high NCD (e.g., 60% or more) that would be costly to lose. | Limited Use: Usually only covers your first claim of the year. A second claim may still reduce your NCD. |
Who should consider it? NCD protection is often most suitable for those who have already built up a high NCD and want to safeguard it against a single, unforeseen event. If you have a low NCD, the extra cost of protection may not provide good value.
How Major UK Health Insurers Handle NCDs
All the leading UK private health insurance providers—including Bupa, AXA Health, Aviva, and Vitality—use some form of No Claims Discount or a similar mechanism to reward low claiming. However, their approaches can differ.
The table below provides a general overview. The exact details can change and depend on the specific policy you choose.
| Provider | Typical Max NCD | How a Claim Affects NCD (General Rule) | NCD Protection Available? |
|---|---|---|---|
| Aviva | Up to 75% | A claim typically reduces the NCD by 3 levels. | Yes |
| AXA Health | Up to 75% (Level 16) | A claim typically reduces the NCD by 3 levels. | Yes |
| Bupa | Up to 70% (Level 14) | A claim typically reduces the NCD by 3 levels. | Yes |
| Vitality | N/A (Uses a different model) | Vitality uses a 'Shared Responsibility' model. Instead of a traditional NCD, your renewal premium is influenced by your engagement with their wellness programme and your claims experience. Healthy living can earn you bigger discounts than simply not claiming. | No (Not applicable) |
This is why comparing the market is so important. A specialist PMI broker can explain the nuances of each provider's system and find the one that best suits your priorities, whether that's the highest possible NCD or a more proactive wellness-based approach.
Switching Health Insurance Providers with an NCD
One of the best ways to manage your health insurance costs is to review your cover and compare providers at each renewal. A common myth is that if you switch insurers, you will lose your NCD and have to start again from scratch.
This is not true.
Most UK insurers are happy to welcome new customers from a competitor and will allow you to transfer your NCD. This is known as "NCD matching" or "switch underwriting". You will need to provide proof of your current NCD level from your existing insurer (usually found on your renewal notice).
When switching, you'll generally have two underwriting options:
- Moratorium Underwriting: You don't declare your full medical history. Instead, the new insurer applies a blanket exclusion for any condition you've had symptoms, treatment, or advice for in the last 5 years. This exclusion can be lifted if you go 2 full years on the new policy without any issues relating to that condition.
- Full Medical Underwriting (FMU): You complete a full health questionnaire. The insurer assesses your medical history and may place specific, permanent exclusions on your policy for pre-existing conditions.
Switching on a moratorium basis is often the quickest and easiest way to move providers while keeping your NCD and maintaining continuous cover. WeCovr specialises in helping clients switch policies seamlessly, ensuring no loss of cover or discount.
Beyond NCDs: Other Ways to Manage Your PMI Premium
While the NCD is a major factor, it's not the only lever you can pull to control your health insurance costs. Here are other effective strategies:
- Increase Your Excess: The excess is the amount you agree to pay towards the cost of any claim. A policy with a £0 excess will be much more expensive than one with a £500 excess. Increasing your excess is one of the quickest ways to reduce your premium.
- Choose a Guided Hospital List: Insurers offer different tiers of hospitals. A comprehensive list including expensive central London hospitals costs more than a more limited regional list. Choosing a list that meets your geographical needs without being excessive can save you money.
- Add a 6-Week Option: This is a popular cost-saving feature. If you add a 6-week option, you agree to use the NHS if the treatment you need has a waiting list of 6 weeks or less. If the NHS wait is longer, your private cover kicks in. This can significantly reduce your premium.
- Embrace Wellness: Providers like Vitality directly link your premium to how healthy your lifestyle is. By tracking your activity, eating well, and getting health checks, you can earn discounts. At WeCovr, we support this by offering our clients complimentary access to the CalorieHero AI calorie tracker and providing discounts on other insurance policies, such as life insurance, when you purchase PMI.
- Review Your Cover Annually: Don't just auto-renew. Your needs change, and the market evolves. A quick annual review with a broker can reveal better-value options you weren't aware of.
Get Expert Help from WeCovr
Understanding No Claims Discounts is key to getting the most out of your private medical insurance. By knowing when to claim, considering NCD protection, and exploring all the cost-management options available, you can ensure you have robust cover without overpaying.
The UK health insurance market is competitive, and the best provider for you depends on your unique needs and budget. As an independent, FCA-authorised broker, WeCovr is here to demystify the process. We compare policies from all the leading insurers to find you the right cover at the best price, all at no cost to you.
What is the difference between an excess and a No Claims Discount?
Will my health insurance premium still go up even with a maximum NCD?
Can I transfer my No Claims Discount to another person?
Do all UK private medical insurance policies have a No Claims Discount?
Ready to find the right private medical insurance for you? Contact WeCovr today for a free, no-obligation quote and let our experts guide you through your options.
