TL;DR
As an FCA-authorised broker that has helped arrange over 900,000 policies, WeCovr provides expert guidance on private medical insurance in the UK. This article explores how a No-Claims Discount can significantly lower your premiums and what you need to know to make the most of this valuable feature. How no-claims bonuses reduce your premium over time A No-Claims Discount (NCD), often called a no-claims bonus, is one of the most significant factors influencing the cost of your private medical insurance (PMI) premium.
Key takeaways
- Starting Your Policy: Most new customers begin on the entry level of the NCD scale, which might be Level 0 or Level 1, offering a 0% discount. Some insurers may offer an introductory discount to new customers.
- A Claim-Free Year: If you complete a full policy year without claiming for any eligible treatment, you will move up one level on the NCD scale at renewal. For example, you might move from a 10% discount to a 20% discount.
- Making a Claim: If you make one or more claims during the policy year, you will move down the scale at your next renewal. The number of levels you drop usually depends on the insurer's specific rules, but a drop of two to three levels is common. For example, if you were on a 50% discount and made a claim, you might drop to a 30% discount for the following year.
- Reaching the Top: The scale has a maximum level. Once you reach the top (e.g., Level 14 with a 70% discount), you will remain there and enjoy the maximum discount as long as you don't make a claim.
- Year 1: Sarah starts at Level 0 with a 0% NCD. Her premium is £50 per month. She doesn't make any claims.
As an FCA-authorised broker that has helped arrange over 900,000 policies, WeCovr provides expert guidance on private medical insurance in the UK. This article explores how a No-Claims Discount can significantly lower your premiums and what you need to know to make the most of this valuable feature.
How no-claims bonuses reduce your premium over time
A No-Claims Discount (NCD), often called a no-claims bonus, is one of the most significant factors influencing the cost of your private medical insurance (PMI) premium. In simple terms, it's a reward from your insurer for not making a claim on your policy.
For every consecutive year you hold your policy without claiming for treatment, your insurer adds a discount to your renewal premium. This discount grows over time, often up to a substantial maximum of 70% or even 80%, making long-term loyalty and good health financially rewarding. However, if you do need to make a claim, this discount is typically reduced, causing your premium to rise the following year.
Understanding how this system works is crucial for managing your health cover costs effectively.
What is a No-Claims Discount in Private Medical Insurance?
Think of a PMI No-Claims Discount like the one you have on your car insurance, but tailored for health. It's a tiered discount system designed to incentivise policyholders to manage their health and only use their insurance for necessary medical treatment.
When you first take out a policy, you'll usually start at the bottom of the NCD ladder, with a 0% discount. Each year you renew the policy without making a claim, you move up a level, and your discount increases. The more years you go without claiming, the higher you climb and the more you save.
This mechanism helps insurers keep overall premiums lower by discouraging small or frivolous claims, while rewarding customers who maintain good health or choose to pay for minor treatments out-of-pocket.
How Does a PMI No-Claims Discount Work?
The process is straightforward and typically follows a clear annual cycle.
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Starting Your Policy: Most new customers begin on the entry level of the NCD scale, which might be Level 0 or Level 1, offering a 0% discount. Some insurers may offer an introductory discount to new customers.
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A Claim-Free Year: If you complete a full policy year without claiming for any eligible treatment, you will move up one level on the NCD scale at renewal. For example, you might move from a 10% discount to a 20% discount.
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Making a Claim: If you make one or more claims during the policy year, you will move down the scale at your next renewal. The number of levels you drop usually depends on the insurer's specific rules, but a drop of two to three levels is common. For example, if you were on a 50% discount and made a claim, you might drop to a 30% discount for the following year.
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Reaching the Top: The scale has a maximum level. Once you reach the top (e.g., Level 14 with a 70% discount), you will remain there and enjoy the maximum discount as long as you don't make a claim.
A Real-Life Example
Let's imagine Sarah, 35, takes out a new PMI policy.
- Year 1: Sarah starts at Level 0 with a 0% NCD. Her premium is £50 per month. She doesn't make any claims.
- Year 2: At renewal, she moves up the NCD scale. Let's say her new level gives her a 10% discount. Her underlying premium might have increased slightly due to age and medical inflation, but the NCD helps offset this. Her new premium is now £48 per month.
- Year 3-5: Sarah remains healthy and makes no claims, moving up the discount ladder each year. By Year 5, she has a 40% discount.
- Year 6: Sarah needs physiotherapy for a sports injury and makes a claim. At her next renewal, her insurer moves her down two levels on the NCD scale, reducing her discount to 20%. Her premium for Year 7 increases as a result.
This example shows the direct link between claiming and the price you pay at renewal.
The No-Claims Discount Scale Explained
Each insurer has its own NCD scale, but they generally follow a similar structure. They consist of multiple levels, each with a corresponding percentage discount. The top levels offer very significant savings.
Here is a typical, illustrative example of what a PMI No-Claims Discount scale might look like.
| NCD Level | Discount on Renewal Premium | Impact of Making a Claim |
|---|---|---|
| 14 | 70% (Maximum) | Drop to Level 11 |
| 13 | 65% | Drop to Level 10 |
| 12 | 60% | Drop to Level 9 |
| 11 | 55% | Drop to Level 8 |
| 10 | 50% | Drop to Level 7 |
| 9 | 45% | Drop to Level 6 |
| 8 | 40% | Drop to Level 5 |
| 7 | 35% | Drop to Level 4 |
| 6 | 30% | Drop to Level 3 |
| 5 | 25% | Drop to Level 2 |
| 4 | 20% | Drop to Level 1 |
| 3 | 15% | Drop to Level 0 |
| 2 | 10% | Drop to Level 0 |
| 1 | 5% | Drop to Level 0 |
| 0 | 0% (Base Level) | Remain at Level 0 |
Note: This table is for illustrative purposes only. The exact percentages, levels, and rules for dropping down the scale vary between different UK private medical insurance providers.
What Actually Counts as a 'Claim'?
This is a common source of confusion for policyholders. Not every interaction with your insurer will impact your No-Claims Discount. Understanding the distinction is key to using your policy wisely.
Actions that typically DO NOT affect your NCD:
- Using value-added benefits: Most policies come with extra perks. Using these almost never counts as a claim. Examples include:
- Virtual GP or 24/7 remote doctor services.
- Mental health support helplines.
- Wellness apps and health information lines.
- Discounts on gym memberships or fitness trackers.
- Cash benefits for NHS treatment: If your policy includes an NHS cash benefit (a fixed payment for each night you spend in an NHS hospital), claiming this usually does not affect your NCD.
- Making an enquiry: Simply calling your insurer to check if a condition or treatment is covered will not impact your discount.
Actions that almost always DO affect your NCD:
- Any claim for private diagnosis or treatment: This is the main trigger. If your insurer pays for any of the following, your NCD will likely be reduced:
- Consultations with a specialist.
- Diagnostic tests like MRI or CT scans.
- In-patient or day-patient surgery.
- A course of outpatient treatment like physiotherapy or psychotherapy.
An expert PMI broker, such as WeCovr, can help clarify the specific rules of your chosen policy, ensuring you know exactly what actions will and won't affect your premium.
Protecting Your No-Claims Discount
Just like with car insurance, many PMI providers offer the option to protect your No-Claims Discount. By paying a small additional amount on your premium, you can make one or more claims in a year without it affecting your NCD level.
Is NCD Protection Worth It?
It depends on your circumstances and attitude to risk.
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Arguments for Protection: If you have built up a very high NCD (e.g., 60-70%), the financial impact of losing it could be significant. The small extra cost of protection can be seen as insurance for your discount, providing peace of mind. If you anticipate needing treatment, it might be a wise investment.
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Arguments Against Protection: If you are young, healthy, and on a lower NCD level, the cost of protection may not be justified. Furthermore, the cost of protection itself can sometimes add up to more than the potential saving over several years.
Consider the maths: if NCD protection adds £10 per month (£120 per year) to your premium, but a claim would only increase your premium by £200 for one year, you might decide to take the risk. An independent broker can help you weigh the costs and benefits for your specific situation.
Comparing NCDs Across Major UK PMI Providers
While most providers use an NCD system, their approaches can differ. Here's a general overview of what to expect from some of the leading names in the UK market.
| Provider | Typical NCD Approach | NCD Protection Available? | Noteworthy Features |
|---|---|---|---|
| Axa Health | Uses a traditional, multi-level NCD scale, often up to 15 levels with a high maximum discount (e.g., up to 75%). | Yes, typically available as an add-on. | Known for clear, structured policies and comprehensive cover options. |
| Bupa | Often uses a system called 'Bupa Bonus'. It's similar in principle but may have different tiers and rules compared to a standard NCD scale. | Yes, NCD protection is usually an option. | Bupa has a strong brand reputation and an extensive network of hospitals and facilities. |
| Aviva | Employs a standard NCD model, rewarding customers for not claiming. Their scale is typically very competitive. | Yes, an option to protect the discount is standard. | Often praised for good customer service and a wide range of policy customisation options. |
| Vitality | Unique approach. Vitality's pricing is heavily linked to their 'Vitality Programme'. While they have a base premium, it's actively influenced by how much you engage in healthy activities (e.g., tracking steps, gym visits). Positive engagement can lower your renewal premium, whereas a lack of engagement can increase it. This is different from a pure no-claims model. | Not applicable in the traditional sense, as the model is based on engagement and wellness, not just claims. | A revolutionary model that actively encourages and rewards a healthy lifestyle. |
As the table shows, there's no single "best" NCD system. The right choice depends on your priorities. Do you prefer a simple, predictable discount for not claiming, or an interactive system that rewards you for being active?
The Alternative: Community-Rated Schemes
Not all PMI policies use a No-Claims Discount. The main alternative is a 'community-rated' scheme.
With community rating, your premium is not affected by your personal claims history. Instead, the insurer pools all the customers in a specific group (usually defined by age and geographical location) and sets a single price for everyone in that pool.
Pros of Community Rating:
- No Claim, No Penalty: You can claim for treatment as often as needed without fearing a premium hike at renewal. This provides great peace of mind.
- Premium Predictability: Your renewal premium changes are primarily driven by age and overall medical inflation, not your individual usage.
Cons of Community Rating:
- No Reward for Good Health: You don't receive a personal discount for staying healthy and not claiming.
- Potentially Higher Starting Premiums: Because the risk is shared across the group, your initial premium may be higher than on an equivalent NCD policy.
Community rating is often favoured by larger companies for their group schemes, but it's also available on some individual policies.
Critical Information: What UK Private Medical Insurance Does and Doesn't Cover
It is essential to understand the fundamental purpose of private medical insurance in the UK.
PMI is designed to cover acute conditions that arise after your policy begins.
- An acute condition is a disease, illness, or injury that is likely to respond quickly to treatment and lead to a full recovery (e.g., a cataract, a hernia, a broken bone).
Standard UK PMI policies DO NOT cover:
- Pre-existing conditions: Any medical condition you had symptoms of, received advice for, or were treated for before the start of your policy.
- Chronic conditions: Illnesses that are long-lasting and cannot be cured, only managed. This includes conditions like diabetes, asthma, high blood pressure, and arthritis. While the initial diagnosis of a chronic condition might be covered, the long-term management and monitoring will typically revert to the NHS.
How Other Factors Affect Your PMI Premium
Your No-Claims Discount is a major factor, but it's not the only one. Insurers calculate your premium based on a range of risk factors:
- Age: This is the most significant factor after NCD. As we get older, the statistical likelihood of needing medical treatment increases, so premiums rise accordingly.
- Location: Healthcare costs vary across the UK. Premiums are often higher in London and the South East, where hospital and specialist fees are more expensive.
- Level of Cover: A comprehensive policy that covers in-patient, day-patient, and extensive outpatient treatment will cost more than a basic policy covering only in-patient care.
- Excess: This is the amount you agree to pay towards the cost of any claim. A higher excess (£500 or £1,000) will result in a lower premium.
- Hospital List: Insurers offer different tiers of hospitals. A policy that gives you access to premium central London hospitals will be more expensive than one with a more limited regional network.
- Underwriting: The method used to assess your medical history (e.g., Moratorium vs. Full Medical Underwriting) can influence the initial price and what is covered.
An experienced PMI broker like WeCovr can help you balance these factors to design a policy that fits your budget and healthcare needs.
Maximising Your Health to Minimise Claims
The best way to maintain a high No-Claims Discount is to stay healthy and reduce your need for medical intervention. Many insurers actively support this, as it benefits both you and them.
- Embrace a Balanced Diet: Focus on whole foods, fruits, vegetables, and lean proteins. Good nutrition is the foundation of health and can help prevent a range of conditions. For tailored support, WeCovr offers complimentary access to its AI-powered calorie and nutrition tracking app, CalorieHero, to all its PMI customers.
- Stay Active: The NHS recommends at least 150 minutes of moderate-intensity activity a week. This could be brisk walking, cycling, swimming, or dancing. Regular exercise strengthens your heart, improves mental health, and helps maintain a healthy weight.
- Prioritise Sleep: Aim for 7-9 hours of quality sleep per night. Sleep is vital for your immune system, mental clarity, and physical recovery.
- Manage Stress: Chronic stress can contribute to physical health problems. Use the mental health support lines included in your PMI policy for early support. Techniques like mindfulness, yoga, and spending time in nature are also proven to help.
By taking a proactive approach to your wellbeing, you not only improve your quality of life but also increase your chances of keeping your PMI premiums low.
Why Use a Broker like WeCovr?
The UK private medical insurance market is complex. With different NCD scales, community-rated options, NCD protection, and countless ways to customise a policy, making the right choice can be overwhelming. This is where an independent broker adds immense value.
- Expert Navigation: WeCovr's specialists understand the fine print of each insurer's NCD policy. We can explain the differences between a Bupa Bonus and an Aviva NCD, and help you decide if NCD protection is a good investment for you.
- Whole-of-Market Comparison: We compare policies from across the UK's leading providers, ensuring you get the best possible cover for your budget, not just the policy with the most eye-catching NCD.
- No Cost to You: Our expert advice and policy arrangement service is completely free for you. We are paid a commission by the insurer you choose, so you get impartial guidance without any extra fees.
- Long-Term Value: We can also help you find other types of insurance, such as life or income protection, and often provide discounts when you purchase multiple policies through us.
Will my premium still go up even with a maximum No-Claims Discount?
Can I transfer my No-Claims Discount from one insurer to another?
Does using the virtual GP service on my policy affect my No-Claims Discount?
Navigating the world of No-Claims Discounts is key to getting the best value from your private medical insurance. To find the right policy that rewards your good health and provides peace of mind, speak to an expert.
Get your free, no-obligation PMI quote from WeCovr today and discover how much you could save.
