A no claims discount is a reduction on a motor insurance premium earned for each consecutive year a driver holds a policy without making a fault claim. The discount grows with each claim-free year and can cut the premium substantially over time.
In one line: A no claims discount rewards claim-free years with a growing percentage cut off the motor premium.
How a no claims discount works
Each insurer sets its own discount scale, but it commonly rises year by year until it reaches a ceiling, often after five or more claim-free years. A fault claim usually reduces the accumulated years rather than wiping them out entirely.
On a base premium of 800 GBP, a discount of 60% after several claim-free years brings the cost down to 320 GBP. A single fault claim might step the entitlement back by two years, raising next year's price.
The discount belongs to the driver and can be transferred to a new insurer with proof of the previous policy.
No claims discount vs protected no claims discount
A standard no claims discount can shrink after a fault claim. Paying extra to protect it lets a set number of claims be made within a period without losing the accumulated years.
Protection guards the discount percentage but does not stop the underlying premium rising after a claim, because the base price itself can increase.
Primary source: FCA: Insurance