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What's wrong with controlling 'circumstantial risk' with NCD?

Don't you believe in circumstantial risk?

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Paul Smith
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Well yes, I believe in it, but I still don't see how it suddenly doubles after two years!

Can we define "circumstantial risk" as a combination of location, habits, and attitude? By location I mean the inherent risk of where you live and where you store the car. By habits I mean whether you tend to regularly visit areas of high risk and/or park your car there etc, and by "attitude" I mean things like whether you take care to avoid claims - eg locking the car whilst you pay for your petrol etc.

Now some of these issues are measured by basic policy loading, and some by the gaining of NCD. But I fail to see how a long period of non-insurance would inherently lead to a rise in this circumstantial risk. Indeed I'd say the reverse is true: if I haven't insured a car for 5 years then there's every chance I'm now 5 years older than when I last insured a car . As people get older I'd expect they are statistically likely to have a lower circumstantial risk, all other things being equal, ie they are less likely to frequent dodgy areas, more likely to be more responsible and careful about locking cars when paying for petrol etc.

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As time goes by circumstances become progressively unknown.



I think the 'attitude' bit goes to individual risk.

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Paul Smith
Our scrap speed cameras petition got over 28,000 sigs
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It might do in theory, but in practice it can't be measured by straight risk assessment. You can't predict whether a driver will be the type to take particular care over locking his car etc compared to another driver with the same apparent driver risk. For this method I think the notion of NCD is quite a good measure, as well as being a positive incentive towards improving the level of "claim aversion".

But if that's what NCD is about, then I can't see how my inherent "claim aversion" would decrease simply because I haven't held an insurance policy for 5 years. As I said earlier, I'd say that it would probably increase if anything, due to increasing maturity.

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I think you're being a bit myopic about this. Suppose you build up 5 years NCD then stop driving for 20 years. Are you seriously claiming that you should be able to just pick up where you left off with 5 years NCD?

If not, the only argument is how quickly the NCD should decay, not whether.

Actually I think the opposite is true. I'm trying not to be constrained by thinking "that's just the way it's done" and to think strictly in terms of logic...

Well I can't actually see a reason why not. It depends on what we think NCD is measuring (or rewarding). Do we go with my "best guess" that it is mainly an attitude measurement - ie a measure of what lengths I will go to in order to prevent a claim, all other things being equal?

If this is the case, then my observation and experience of human nature would lead me to believe that there is nothing about the process of ageing 20 years that should worsen someone's NCD record.

Or to look at it another way, someone who drives claim free for 5 years then has 20 years off is surely a better insurance prospect than someone who has never driven at all?

But in any case, it's not 20 years we're talking about is it? It's 2. In my wife's case she had built up about 10 years of claim free record, yet this is struck out after just two years of non-driving.


Perhaps it might be a bit more respectable if it decayed at the same rate it accrued. Eg my wife's ten years drops back to 8.

I also think this should apply to claims too. If a claim reduces entitlement by 2 years then someone with 20 years NCD should drop back to 18 not to 3, but that's another story...

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Here's another 'circumstantial risk' for you: wealth. If my car got damaged now, I'd have to make a claim becuase I'm skint. 3 years ago, I'd have calculated the greater cost and made a judgement.

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Paul Smith
Our scrap speed cameras petition got over 28,000 sigs
The Safe Speed campaign demands a return to intelligent road safety

I'd never considered the "wealth" aspect but that's a good point.

Having said that, most people don't go off and devote their life to extrememely important but poorly funded research (more's the pity) so on average wouldn't the opposite be true? That as they get older they are more financially secure and less likely to have to make a claim.

As an example, vandals knocked both door mirrors off my sister in law's car, so she claimed off the insurance for about £400 to replace them. I made her fully aware that in the long term this would cost her more than if she just stumped up but she claimed nonetheless, simply because she couldn't find the money, what with 3 kids to bring up etc etc. Now on average, I would say that in ten years time she'd make the opposite choice, as the kids would have left home and she'll probably be more financially secure. And this would remain true regardless of whether she runs a car between now and then...

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Your argument appears to be that NCD practice does not perfectly reflect risk. I'm sure that's true. But if it was possible to perfectly measure risk and reflect it in motoring costs, there would be no need for insurance at all.

Actually, what I'm trying to say is that NCD practice is - or should be - completely unrelated to actual risk, as that is measured and dealt with by an adequate mechanism elsewhere.

Can you define what you think the purpose of NCD is?

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Don't get me wrong, I hate vandals and I'd lock them all up and throw away the key etc. etc. But £400 for mirrors! My Toyota only cost £450 for the whole car!

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That's the world we live in though, isn't it? The car was nothing special - a Renault Megane - but like most cars had electric mirrors. You have to have them by law (well ok at least one) so what else was she to do?

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If you refer to the factors that insurers use to calculate premium (vehicle, postcode, driver sex/age/experience/history/mileage/occupation/use etc) then I disagree. I'd say those are used to calculate a statistical mean risk by which the basic premium is calculated.



So the NCD is intended to reflect deviation from the statistical mean risk based on actual claims/accident/driving history.

I know, the makers and dealers gouge like hell nowadays. They should be ashamed. It costs hundreds just to change a gasket. I know a bloke with a Volvo. It has a computer in it. When the mirror motor went, he had to change the locks because there was a software link between them and they all had different versions! I drive jallopies so that I never have to claim - it's cheaper to get rid and buy another one. Trouble is, it's hard to get good jallopies nowadays - they're loaded with computerised junk and gadgets. Keep it simple, I say. I have heard that a maker is going to introduce a pucker, old-style car with less expense-creating gizmos. I might even buy one if somebody does that. But I'm not getting a modern, pre-obsoleted junk pile.

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Possibly. All else being equal. But the insurer has no way of knowing if all else is equal so has to rely on recent insurance history.

I'd say the NCD is an invention by actuaries to maximise insurance margins. But as all insurance firms employ actuaries, the schemes result in lower overall payouts. As companies compete for business, this has the desirable effect of lowering costs for good drivers, and raising them for bad ones. Basically, I want to share risk with good drivers like me, not crashy people! People like that should form their own insurance company if they can’t get a deal.

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Try Saga?

I have to say I'm surprised this subject has generated so much debate.

I have twice been in the position of needing to insure a private car after a period of having a company or lease car, but fortunately each time it has been within the two-year timeframe, so I have been OK.

All the NCD measures is your propensity to make claims - nothing more, nothing less. It isn't a measure of safe driving as such.

It seems reasonable enough to me that insurance companies should take the view that the confidence this will continue to apply will erode over time - however two years does seem a rather arbitrary cut-off and it would be better if it was allowed to tail off more gently up to five years.

People's circumstances change and having been claim-free ten years ago is no guarantee that you will be now.

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"Show me someone who says that they have never exceeded a speed limit, and I'll show you a liar, or a menace." (Austin Williams - Director, Transport Research Group)

Any views expressed in this post are personal opinions and may not represent the views of Safe Speed