Anyone here have any knowledge how insurance companies calculate your premiums?

The situation I have is that I have had 3 claims in the last 5 years. No, I'm not an accident waiting to happen, a couple of the claims were out of my hands, ie., came back to my car to find someone had reversed into it for example.
The insurance company have now obvious stumped up my insurance big time for my renewal, and taken away my protected no claims bonus, which was at 75% (9 years worth). Actually they have reduced it to 2 years at 62.5% which doesn't sound bad, but they are wanting to charge me £500 for a cheap run about Honda worth £600 tops!

I am trying to weigh up whether its worth paying off one of these claims myself so that I get my protected 75% NCB back. I know the risk that having an accident or claim again will put me back to square one, but I'm okay with that.

What I'm trying to decide is whether it is worth paying out £750 for one of the claims. This will bring my insurance down to £361, but more importantly, when I go for a better car in the next few months (530d or 330ci) then the premium will be about a 3rd cheaper.


I'm interested in knowing how an insurance company calculates how much they reduce your premium each year if you have had no accidents in that period (not taking NCB into account)? They must have some sort of method to calculate this, after taking into account the usual variables mentioned above.

If you can understand this can anyone offer advice please?

Cheers

 

Here is the secret formula for calculating your insurance premium :-


Your dads waist size Number of goals Chelsea have scored this season
------------------- X ------------------------------------------------
your mums shoe size Number of goals Everton have scored this season


The result is then raised to the power of 4 and your take the cube root of that.Next you add the highest salary from the US baseball league and divide the answer by the cubic capacity of your engine.

And that is your price for a years insurance !

 

Maybe I'm missing something, but I don't understand your question.

If you have had no claims in the previous year, the reduction in your premium is your NCB. There is no other reduction. The amount of NCB may vary between insurance companies, but typically it is 30% for 1 year, 40% for 2 years, 50% for 3 years, 60% for 4 years and 65% for 5 years or more. People may talk of having 9 years NCB, but in reality they will still only have 65%.

These figures above are "typical" figures. Some companies may offer more or less (eg an extra 10% off for teachers or nurses, etc.), so your mention of having had 75% NCB is perfectly possible.

In general a claim (and remember; it is a claim and not an at-fault accident) will knock your NCB back by 2 years, so a first claim from full NCB would knock you back to 50% on the above figures. Someone with so-called 9 years NCB would be knocked back in the same way ie to 50%.

A second or third claim in a short period of time could end up with your premium being "loaded". In other words, let's say that the "normal" premium for your age, car, occupation, address, etc., was £1000. After bad claims experience it might be increased by (say) 20%.

 

Hi Doug, cheers for the more sensible reply (although I think Maclean2 may be onto something there!)

The point I was trying to make I think you answered in your last paragraph. Its the idea of "loading" if you have a succession of claims. The NCB is a percentage applied to a gross insurance figure, so I wanted to know how the increase/decrease this figure depending on your claims record.

I know that I must have loaded this figure due to the number of claims I've had, but how does this then get reduced? In your example you say they may (I know hypothetically) load it by 20%. Does this then get removed if you don't have a claim in the following year of insurance?

Hope I'm making sense.

Cheers

 

You're making perfect sense.

Provided you have no more claims the loading will eventually work its way off your premium. Let's say that the insurer decides that a single claim in the last year means that you lose the appropriate amount of NCB but they don't load the premium for a single claim but 3 claims in 2 years means that they load by 20%. Let's also say that you had a claim 20 months ago, a claim 15 months ago, and a third claim 2 months ago.

Your insurance is due for renewal today so the insurer looks at your claim history and sees 3 claims within the last 2 years. So the premium is loaded by 20%. This time next year you have made no further claims. The insurer will look at your claims history when calculating the premium. Your history is now that you have had one claim in the previous 2 years (it's now 14 months since the claim). There is now no reason to load the premium so you get normal rates again (and a year's NCB as well).

So, yes, loadings for claims history will eventually be removed as long as no further claims are made. Different insurers will have different rules about how much they load the premium for claims experience so the best advice (as always) is shop around.