Revisiting No-Claims Bonuses and Their Impact on Insurance

In 2017, Chris Barry, founder of Beqfin and Managing Director of Heavy Commercial Vehicle Underwriting Managers (HCV), penned a thought-provoking article for News24 titled “No-claims bonuses cost the insurance industry, puts consumers at risk.”. Now, eight years later, Chris’s insights remain profoundly relevant, offering a legacy of wisdom for the insurance industry and consumers alike. As we reflect on his powerful words, let us explore the enduring relevance of his concerns and their implications for the modern insurance landscape.  

What Are No-Claims Bonuses?

No-claims bonuses (NCBs) are incentives offered by insurers to reward policyholders who go for a specified period without making a claim. Typically, this reward comes in the form of reduced premiums or rebates. While appealing to consumers as a way to save money, NCBs can also influence decision-making when an incident occurs, often discouraging policyholders from filing claims to preserve their bonus. In the trucking industry, where vehicles endure high mileage and significant wear and tear, the concept of NCBs becomes particularly relevant. Truck owners and fleet managers may hesitate to claim for minor damages, opting instead to cover repair costs themselves. While this may seem economical in the short term, it can lead to larger issues if critical repairs are delayed or if misunderstandings arise about third-party liability.  

The Double-Edged Sword of No-Claims Bonuses

No-claims bonuses are often seen as a win-win strategy for the insurance industry, reducing claims from existing policyholders and driving the sales of new policies. Yet Chris Barry was quick to challenge this notion, warning that these incentives pose risks for both consumers and insurers. His key concern? Many consumers lack a full understanding of the implications of not claiming from their insurers, particularly when dealing with third-party claims. Barry explained that in cases where consumers believe another party is responsible for an accident, they often approach the third party’s insurer directly. However, this approach leaves them unprotected by contractual law, as their agreement is with their own insurer. “Consumers have little understanding that motor claims are not transactions but variations of legal culpability,” he noted, highlighting a widespread misconception.  

Strains on Insurers

This lack of understanding places significant strain on insurers. Claims staff often face frustrated consumers who are not their clients, leading to disputes over the merits of claims or the cost of damages. According to Barry, this dynamic creates a drain on resources in multiple ways:

• Reputational Management: To preserve their reputation in an era dominated by social media and online reviews, insurers often feel compelled to send assessors to evaluate vehicle damage for vehicles not covered by their policies.
• Operational Disruptions: Claims teams must dedicate time to handling disputes with non-clients, detracting from their ability to assist actual policyholders.
• Emotional Toll on Employees: Barry emphasized the emotional impact on employees, who are acutely aware that such conflicts tarnish the reputation of the entire insurance industry.

 

The Danger of Discouraging Claims

Chris Barry also questioned the practice of using no-claims bonuses to subtly discourage policyholders from submitting claims. He argued that insurers adopting this approach might struggle to handle claims effectively when they do arise, leading to reputational damage that extends beyond individual providers to the industry as a whole. He highlighted how policies sold on the promise of no-claims bonuses often encourage poor decision-making among policyholders, who may prioritise short-term savings over long-term protection. This practice, Barry warned, endangers not only consumers but also insurers themselves.  

A Call for Industry Reform

Chris Barry’s vision extended beyond identifying problems; he called for constructive industry dialogue to establish firm guidelines on the use of no-claims bonuses. He believed that such guidelines would protect both consumers and insurers, ensuring that incentives do not come at the cost of reliability or trustworthiness.  

A Legacy Built on Wisdom and Vision

Chris Barry’s legacy is one of integrity, wisdom, and forward-thinking. At Beqfin, we carry his lessons and vision into the future, building on the strong foundation he set for us. His insights continue to guide us as we navigate the challenges of our industry and strive to uphold the values he held dear.

At Beqfin, we’ve gone a step further to provide immediate, reliable solutions for our clients. Through our own insurance broker, Keep On Trucking, we ensure that fleet owners, truck drivers, mechanics, and other relevant parties have access to tailored insurance solutions right away when they use our financing support. If you’d like to hear more about our insurance policies, contact us at 087 8067 390 or email us at admin@keepontrucking.co.za

By resharing his words and adding to them, we honour his legacy and aim to contribute to a safer, more transparent insurance ecosystem. Chris’s call for reform is as relevant today as it was eight years ago. Let’s ensure that his vision of protecting both consumers and insurers is not forgotten.

Read the original article that sparked this conversation here https://www.news24.com/life/motoring/news/guides_and_lists/no-claims-bonuses-cost-the-insurance-industry-puts-consumers-at-risk-20170518