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No claims loophole could hurt motoring policy-switchers

Article by Simon Christopher
Posted: 12/8/2012 - Last updated: -
Rating: 3.00 3.00 (1 votes)

A major flaw in the way insurers deal with no-claims bonuses could mean millions of drivers are paying too much. That's the claim made by Auto Express, which made the discovery when checking up on a complaint by a reader.

The problem stems from the limits on how many years a driver can go without making a claim and still get additional discounts. After this limit, additional claim-free years don't lead to any further premium drops. While this limit is typically five years, the figure varies from company to company: an Auto Express survey found a range from four years to 20 years.

When switching from a company with a higher limit to a lower limit, this isn't a problem. For example, if a customer from insurer A with a five year limit gets a quote from insurer B with a four year limit, the quote will include a discount based on four years without a claim.

The problem is when the change is the other way round. If a customer from insurer B has been five years without a claim goes to another firm, insurer B will only verify that they've reached its four year limit. This means that even though the driver should qualify for a full five-year discount from insurer A, they won't be offered it because there isn't proof that they have the fifth claim-free year.

The Association of British Insurers said it was looking into the issue and is considering setting up a database that confirms how many years each driver has gone without making a claim, regardless of the limit on their current policy.

PLEASE NOTE: News items are intended for information only and should not be relied upon when making insurance decisions. Due to their nature, some of the information in news stories including any references to taxation, legislation, regulation, or other issues may no longer be current.

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