No Claims Discount or Community Rated Plans?

The level of no claims discount on your health insurance can vary from insurer to insurer. The other option available to you is to choose an insurer that offers a community rated scheme.

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What is a no claims discount?

Just like car insurance, no claims discount reduces the amount you pay for your cover if you don’t make a claim. You can build up a no claims discount and you could see a deduction in your premium. However, if you do make a claim this could affect your renewal premium and potentially increase future renewal quotations.  Each insurer that offers one has a scale of no claims levels, each no claims level has a corresponding discount associated with it.


Some insurers, like AXA PPP for example, will only move you back 3 levels of no claims discount regardless of the number of claims made in a policy year. AXA PPP also give each member on the policy their own NCD. Meaning that the claims that person makes only effects their portion of the price. 

Some other insurers like Saga will increase the price for all members on the policy if just one person claims. They will move the levels down for each claim made in a policy year.

Many clients have commented in the past that the no claims discount scales can make it difficult to work out the cost of potential claims. One of the misconceptions is that if you lose 15% of no claims discount then your premium will increase by 15% as a result, this is not the case.


“Harry is with AXA PPP and paying £1000 annually for his policy, he has a 50% NCD. He makes a claim against his policy and his renewal quote is issued for the next policy year with only 35% NCD, as he has moved back 3 levels he has lost 15% of his no claims discount. 

His new premium is calculated like this – 

Step 1) Premium / Percentage paid last year of full cost= 1% of base rate premium 

Step 2) 1% of base rate Premium x new percentage he is being asked to pay = New premium

So in this case it would be;

Step 1) £1000/50=£20

Step 2) £20 x 65 = £1300 meaning a £300 increase as a result of the claim.

If Harry went on to make any further claims in the same policy year his no claims discount would not reduce any further whereas with some insurers who penalise per claim made, it might”*

As the no claims discount system varies depending on your insurer, its best to give your insurer or ourselves a call to see exactly how the structure works with your chosen policy. When you go to make a claim, you can enquire how this will impact your no claims discount and decide whether making a claim is financially worthwhile.

*We have used simple maths as an example of how NCD’s work. In practice the costs may vary, insurance premium tax may increase at renewal, you will also get an increase due to age and base rate medical inflation as well as the claims impact.

  • Aviva 
  • Bupa 
  • The Exeter

Community Rated plans are typically more expensive to join than no claims discount rated schemes. They can be more stable year on year as your claims do not directly influence the renewal premium on your policy.

Instead what happens is the cost of claims is spread across the whole membership of that particular insurers product. So if the insurer has a good year and the cost of claims vs the premium paid is low there is unlikely to be a large increase in premium even if you yourself have claimed heavily. However, a community rated plan could cause your premium to increase despite not claiming. 

  • The Exeter – New underwriting only
  • WPA
  • CS Healthcare
  • Freedom Health

This comes down to the type of person you are and whether or not you are prepared to accept a little managed risk.

Some are prepared to accept a managed risk and are open to switching medical insurance providers in future to achieve better pricing, then the no claims discount approach will probably work well for you.

If you prefer to know that the price will likely stay stable for a longer period of time should you claim regularly, accepting a higher initial premium for a community rated bad may be the right choice for you.

Should you be in any doubt or want to discuss you options, give one of our team a call or fill in our get advice form.

VitalityHealth are different because they offer neither a no claims discount rated policy or a community rated plan.

What they do instead, and are unique as a result, is they offer a ABC pricing style, this stands for;

  1. Age
  2. Base rate medical inflation
  3. Claims

VitalityHealth do not offer any initial discount. The price you are paying is 100% of the true cost, or the base rate price in other words.

You are also told you upfront what will happen if you make a claim against the policy, the percentage increases are listed in their policy documentation.

Vitality also give you the chance throughout the year to earn a discounted claims impact. If you can show them that you are generally fit and healthy by tracking activity then the claims increase actually gets smaller as you move up activity levels.

If this is something that interests you and you would like more information about how it works please call 01242 350071.