Category: Motor · Reviewed by Chrissie Anderson, Client Executive · Service · Last reviewed 2026-06-05
A no claims discount (NCD), also known as a no claims bonus, is a percentage discount applied to a UK motor insurance premium in recognition of consecutive claim-free policy years, typically accruing in annual increments to a maximum after five to nine years of clean history.
Category: Motor Also known as: NCD, no claims bonus, NCB First codified: UK market practice from the 1920s; no statutory definition Related legislation: Financial Conduct Authority Handbook, ICOBS 6A (renewal disclosure) Apex Wiki link: /wiki/no-claims-discount/
A no claims discount (NCD) is a percentage discount applied by a motor insurer to the rated premium of a UK motor insurance policy in recognition of consecutive policy years in which the insured has not made a fault claim under their motor insurance. It is sometimes called a ‘no claims bonus’ (NCB), although ‘discount’ is the more accurate description because the reduction is applied to the gross premium calculated by the insurer’s rating model [1].
NCD is not a statutory or regulatory concept; it is a market practice that has been universal in UK motor insurance since the early 20th century. Each insurer publishes its own NCD scale, but the typical scale grants discounts of approximately:
The discount is applied to the premium that the insurer would otherwise charge for the same risk without an NCD entitlement, so the comparative size of the discount depends on the insurer’s underlying rating. An insurer with a higher underlying rating for a given risk will offer a larger absolute saving from a given NCD percentage than one with a lower underlying rating.
The discount is normally lost or reduced when a fault claim is paid under the policy, unless NCD protection is in force. NCD is portable between insurers: a proof of NCD letter issued by the previous insurer is accepted by a new insurer as evidence of entitlement, although verification practices vary.
There is no statute or regulation defining NCD. It is a market construct. However, certain rules of the Financial Conduct Authority Handbook and consumer protection legislation bear on its sale and disclosure:
The Association of British Insurers (ABI) has published informal guidance over the years on common NCD practices and the recognition of NCD between insurers, but there is no industry-binding standard [4].
A particular regulatory development relevant to NCD is the FCA’s General Insurance Pricing Practices final rules (Policy Statement 21/5, in force from 1 January 2022). These require insurers to offer renewing consumers a price no higher than the equivalent new business price for the same product; NCD scales must be applied consistently between new business and renewal pricing under PS21/5 [5].
An insurer maintains an NCD record for each policy. At inception the policyholder declares their NCD entitlement; the insurer normally requires proof from the previous insurer in the form of a renewal notice, cancellation letter or specific ‘proof of NCD’ letter.
NCD is earned only on policies that have been in force for the full policy year (typically 12 months). A short-term policy or a policy cancelled before its anniversary normally does not generate further NCD. NCD entitlement does not transfer between separate policies in force at the same time on different vehicles — each policy earns its own NCD — but a multi-car policy or fleet may operate a different rule.
NCD is lost or stepped back when a fault claim is paid. The typical step-back is:
Fault is interpreted by reference to whether the insurer paid more than it recovered. A genuinely non-fault claim that is recovered in full from the third party’s insurer (e.g. a rear-end shunt where the third party admits liability) normally does not affect NCD. A claim where the third party is uninsured or untraced (and the MIB or the insurer’s own funds bear the cost without recovery) may affect NCD even though the insured was not at fault.
NCD protection is an optional extension under which a defined number of fault claims may be made without step-back. Protection does not prevent the underlying premium from rising following a claim — the discount percentage is preserved but the rated premium itself may increase.
NCD does not accrue indefinitely beyond the insurer’s maximum step (typically 9 years in the market). Some insurers offer ‘lifetime NCD’ once a defined threshold is reached, under which the maximum NCD is preserved through a defined number of claims.
For brokers, accurate proof of NCD is critical at inception. Misdeclaration may amount to misrepresentation under the Consumer Insurance (Disclosure and Representations) Act 2012 [3] and entitle the insurer to avoid the policy or adjust cover.
Variations on the standard NCD model in the UK market include:
NCD as a concept does not exist in the US auto insurance market in the same form (US ‘safe driver discounts’ work on similar principles but are not structured as a year-by-year tabulated scale). Most EEA markets use a bonus-malus system that is broadly analogous but with greater regulatory standardisation.
An illustrative example: a policyholder with 6 years’ NCD insures a £15,000 vehicle. The insurer’s rating model returns a gross premium of £900 before NCD. The insurer’s NCD scale gives 65 per cent at 6 years; the discounted premium is £315.
The policyholder is involved in a fault collision causing £4,000 of damage to a third-party vehicle and £2,500 of damage to their own. The insurer pays the claim. NCD is stepped back from 6 years to 4 years. At the next renewal the insurer’s rating returns £950 (reflecting the claim history); the NCD scale gives 55 per cent at 4 years; the discounted premium is £427.50.
If the policyholder had purchased NCD protection at the outset, the protected NCD would have been preserved at 6 years; the discounted premium would have been £950 less 65 per cent, or £332.50. The protection premium itself (commonly £30 to £60 per year) would offset some of the saving. Figures are illustrative only.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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