TL;DR
As an FCA-authorised broker that has helped arrange over 900,000 policies, WeCovr are experts in the UK private medical insurance market. This guide demystifies No Claims Discounts and loyalty, helping you decide if sticking with your provider is the smartest move for your health and your wallet. How NCDs work, and whether staying loyal saves money on PMI like it does for car cover For anyone with car insurance, the concept of a 'No Claims Discount' (NCD) is second nature.
Key takeaways
- David is on Level 12, enjoying a 60% NCD. His base premium is £2,000, so he pays £800 for the year.
- He develops shoulder pain and uses his policy for a consultation and six physiotherapy sessions.
- At renewal, his insurer drops him three rungs down the ladder to Level 9 (45% NCD).
- His base premium has also increased due to his age and medical inflation to £2,200.
- His new premium is now £2,200 - 45% = £1,210.
As an FCA-authorised broker that has helped arrange over 900,000 policies, WeCovr are experts in the UK private medical insurance market. This guide demystifies No Claims Discounts and loyalty, helping you decide if sticking with your provider is the smartest move for your health and your wallet.
How NCDs work, and whether staying loyal saves money on PMI like it does for car cover
For anyone with car insurance, the concept of a 'No Claims Discount' (NCD) is second nature. You drive safely, you don't make a claim, and your premium gets cheaper each year. It’s a simple, effective reward for being a low-risk customer.
But does this logic apply to private medical insurance (PMI)? The answer is yes, but with some crucial, often costly, differences. While many UK health insurers use an NCD model to reward claim-free customers, the system is far more complex. The "loyalty penalty," a term familiar to home and motor insurance customers, also looms large in the world of PMI, leaving many people wondering if their loyalty is being rewarded or taken for granted.
This article will break down exactly how health insurance NCDs work, explore the pros and cons of staying with your provider, and reveal whether true loyalty perks actually exist in the UK's private health cover landscape.
What is a No Claims Discount (NCD) in Health Insurance?
A No Claims Discount on a private medical insurance policy is a discount applied to your renewal premium for every consecutive year you don't make a claim. Think of it as a sliding scale; the longer you go without claiming, the higher you climb and the bigger your discount becomes.
However, it's vital to understand how this differs from the car insurance NCD you might be used to.
How PMI No Claims Discounts Differ from Car Insurance NCDs
| Feature | Car Insurance NCD | Health Insurance NCD |
|---|---|---|
| Transferability | Usually transferable between insurers. | Not transferable. You start from scratch with a new insurer. |
| Protection | Can often be "protected" for an extra fee, allowing claims without losing the discount. | Protection is rarely offered. A claim almost always impacts your NCD. |
| Impact of a Claim | A single claim may reduce the NCD by a set amount (e.g., 2 years' worth). | A single claim can cause you to drop several levels down the discount ladder, leading to a significant price hike. |
| Simplicity | Generally a simple percentage based on claim-free years. | A tiered "ladder" system, with different insurers using different scales and rules. |
The most significant difference is transferability. If you switch car insurers, you take your hard-earned NCD with you. With health insurance, switching providers means leaving your NCD behind and starting again at the bottom of the new insurer’s ladder. This single factor often discourages people from shopping around, potentially costing them hundreds of pounds a year.
The Mechanics of the Health Insurance NCD Ladder
Most UK private medical insurance providers that use an NCD model have a "ladder" or scale, typically ranging from 10 to 15 levels. New customers start at the bottom (Level 0 or 1) with no discount.
Climbing the Ladder: Rewarding Claim-Free Years
Each year you hold the policy and don't make a claim, you move up one level on the ladder, and your discount increases. This is the insurer's way of rewarding you for being healthy and not using the policy.
Here is a typical, simplified example of an NCD ladder:
| NCD Level | Discount |
|---|---|
| Level 14 | 70% |
| Level 13 | 65% |
| Level 12 | 60% |
| Level 11 | 55% |
| Level 10 | 50% |
| Level 9 | 45% |
| Level 8 | 40% |
| Level 7 | 35% |
| Level 6 | 30% |
| Level 5 | 25% |
| Level 4 | 20% |
| Level 3 | 15% |
| Level 2 | 10% |
| Level 1 | 5% |
| Level 0 | 0% |
So, if you start at Level 0 and don't claim for five years, you could find yourself on Level 5 with a 25% discount on your base premium.
Sliding Down the Ladder: The Impact of Making a Claim
This is where the system can feel punitive. If you make a claim, you don't just stay on the same level—you slide down the ladder. Most insurers will drop you by two or three levels for each year you claim.
Real-life example:
- David is on Level 12, enjoying a 60% NCD. His base premium is £2,000, so he pays £800 for the year.
- He develops shoulder pain and uses his policy for a consultation and six physiotherapy sessions.
- At renewal, his insurer drops him three rungs down the ladder to Level 9 (45% NCD).
- His base premium has also increased due to his age and medical inflation to £2,200.
- His new premium is now £2,200 - 45% = £1,210.
That’s a £410 increase in his annual premium, a jump of over 50%, for making a relatively small claim. This "double whammy"—losing your discount while the base price also rises—is what causes the sharp renewal shocks many people experience.
What Counts as a 'Claim' for NCD Purposes?
A common misconception is that only major events like surgery count as a claim. In reality, almost any service you use that your insurer pays for can trigger a drop down the NCD ladder. This can include:
- Consultations with a specialist
- Diagnostic tests like MRI or CT scans
- Physiotherapy or osteopathy sessions
- Mental health support, including counselling or therapy
- Outpatient procedures
The good news: Many modern PMI policies come with 'value-added benefits' that are designed to be used without affecting your NCD. These often include:
- Digital GP or virtual doctor appointments (24/7 access)
- Health and wellness advice lines
- Symptom checkers
- Sometimes, limited access to mental health support or physio triage services.
An expert PMI broker like WeCovr can help you identify policies with generous benefits that don't penalise you for using them, ensuring you get day-to-day value from your plan.
The "Loyalty Penalty" in UK Private Medical Insurance
The Financial Conduct Authority (FCA) has taken firm action in the car and home insurance markets to tackle the "loyalty penalty," where long-standing customers are charged more at renewal than a new customer would be for the same policy. But does this problem exist in health insurance?
Is Staying Loyal to Your PMI Provider Costing You Money?
In many cases, yes. While the FCA's rules have helped, the nature of PMI means renewal prices will almost always rise. Insurers can justify higher premiums for existing customers based on factors that don't apply to brand new ones.
This is because your renewal price isn't just your old price plus inflation. It's a completely new calculation based on three main factors:
- Your Age: As you get older, you move into a new age bracket, and the statistical risk of you needing treatment increases. This is a non-negotiable part of every renewal calculation.
- Medical Inflation: The cost of private healthcare—from surgeon's fees to advanced scanning technology and new cancer drugs—rises much faster than standard inflation (CPI). This 'medical inflation' can be as high as 8-10% per year and is passed on to all customers.
- Your Claims History: As we've seen, making a claim directly reduces your NCD, pushing your premium up.
New customers, on the other hand, are often lured in with attractive introductory rates. Even if they are the same age as you, they start with a clean slate and a price designed to win their business. This means a new customer quote can often be significantly cheaper than your renewal offer, especially if you have claimed.
The Power of an Annual Review
This is why an annual review of your health insurance is not just sensible—it's essential for managing your costs. Sticking with the same provider for years without comparing the market is one of the easiest ways to end up overpaying.
By using a service like WeCovr, you can have an expert conduct a full market review for you at each renewal. They can compare your insurer's offer against the latest products and prices from all the leading providers, advising you on whether to stick or switch. This service costs you nothing and can save you a substantial amount of money.
Comparing NCD Policies vs. "Community Rated" Schemes
Not all health insurance policies operate on the NCD model. Some providers offer "community rated" schemes, which work in a completely different way. Understanding the difference is key to choosing the right policy for you.
Understanding NCD-Based Pricing
- How it works: Your premium is directly linked to your personal claims record. Don't claim, and you get a discount. Do claim, and your price goes up.
- Best for: Younger, healthier individuals who are confident they won't need to claim and want the lowest possible starting price.
- The risk: Premiums can be volatile and unpredictable. A single illness could lead to years of high renewal costs.
Understanding Community Rated Pricing
- How it works: The insurer pools the risk across all customers on the scheme. The cost of claims is shared across the entire "community." Your individual claims do not directly impact your own renewal premium.
- Best for: Anyone who wants price stability and peace of mind, knowing they can use their policy when needed without being financially penalised. This is often favoured by older individuals or those who anticipate needing treatment.
- The downside: The initial premium might be higher than on an NCD-based policy, as you're not getting a discount for being claim-free.
Some providers, like Freedom Health Insurance, are known for their community-rated options. Others, like Bupa, may offer them on certain corporate schemes.
NCD vs. Community Rated: A Head-to-Head Comparison
| Feature | NCD-Based Policy | Community Rated Policy |
|---|---|---|
| Premium Basis | Your personal claims history. | The collective claims of the entire group. |
| Impact of a Claim | Your premium will almost certainly rise at renewal due to a loss of NCD. | No direct impact. Your premium only rises due to age and medical inflation. |
| Price Predictability | Low. Can be very volatile year-on-year. | High. Increases are generally more stable and predictable. |
| Who It Suits | Those seeking the lowest upfront cost who are unlikely to claim. | Those who value budget stability and want to use their cover without penalty. |
Deciding between these two models can be tricky. A broker can provide a balanced view, helping you weigh the short-term savings of an NCD policy against the long-term stability of a community-rated one.
A Critical Note on Pre-existing and Chronic Conditions
It is absolutely essential to understand what private medical insurance is for. Standard UK PMI policies are designed to cover acute conditions that arise after you take out the policy. An acute condition is an illness, injury, or disease that is likely to respond quickly to treatment and lead to a full recovery.
PMI policies do not cover:
- Pre-existing Conditions: Any medical condition for which you have experienced symptoms, received medication, or sought advice for in the 5 years prior to starting your policy.
- Chronic Conditions: Long-term illnesses that cannot be cured, only managed. This includes conditions like diabetes, asthma, hypertension, Crohn's disease, and multiple sclerosis. While PMI may cover the initial diagnosis of a chronic condition, it will not cover the ongoing, long-term management, which remains the responsibility of the NHS.
When you apply, your medical history will be assessed in one of two ways:
- Moratorium Underwriting: This is the most common type. It automatically excludes any condition you've had in the past 5 years. However, if you remain treatment-free, medication-free, and advice-free for that condition for a continuous 2-year period after your policy starts, the exclusion may be lifted.
- Full Medical Underwriting (FMU): You complete a detailed health questionnaire. The insurer then assesses your medical history and explicitly lists any conditions that will be permanently excluded from your cover. It provides certainty from day one but can be more time-consuming.
Beyond the NCD: Are There Other Loyalty Perks?
If staying loyal doesn't always save you money, do insurers offer other perks to keep you on their books? Increasingly, the answer is yes, but these perks are focused on wellness and engagement, not just price.
Wellness Programmes and Added-Value Benefits
The modern PMI market is about more than just paying for treatment when you're ill. Leading providers are now focused on helping you stay healthy in the first place.
- Vitality is the market leader in this space, with a comprehensive programme that rewards members for healthy activities like tracking steps, working out, and getting health checks. Rewards include discounted gym memberships, free coffees, cinema tickets, and even discounts on an Apple Watch.
- Other providers like Aviva and Bupa have also developed their own wellness apps and benefits, offering everything from mental health support to discounts on fitness trackers.
These programmes can offer significant tangible value. If you are an active gym-goer, the annual saving on your membership could easily offset a portion of your PMI premium.
As a WeCovr customer, you also get complimentary access to our powerful AI-driven calorie and nutrition tracking app, CalorieHero. It's another tool to help you manage your health proactively. Furthermore, taking out a PMI or Life Insurance policy with us can unlock discounts on other types of cover you might need, adding even more value.
Do These Perks Outweigh a Higher Premium?
This is the key question. A 50% discount on a gym membership sounds great, but not if your health insurance premium is £400 a year more expensive than a comparable policy elsewhere.
You need to do the maths. Calculate the real-world monetary value of the perks you will genuinely use and weigh that against the difference in premium. For some, the motivation provided by a wellness programme is a priceless benefit in itself. For others, the bottom-line cost is all that matters. With high customer satisfaction ratings, WeCovr excels at helping clients find this perfect balance.
Will my premium go up if I use the digital GP service?
If I switch PMI providers, can I transfer my No Claims Discount?
What is "medical inflation" and why does it make my health insurance more expensive?
Is it better to have a policy with a No Claims Discount or a community-rated one?
Feeling lost in the maze of NCDs, loyalty penalties, and renewal prices? Let us light the way.
The expert, FCA-authorised team at WeCovr offers free, independent advice to help you find the right private medical insurance for your needs and budget. We compare the entire market to find cover that works for you, at a price that makes sense.
Get your free, no-obligation quote today and see how much you could save.
