How does Claims Grade and Knock-for-Knock work?
When you have had claims you may have to pay more premium on your insurance. Don’t be offended, insurance companies are just trying to automatically place a price on the risk of the driver. In insurance driving this is called ‘pricing risk’.
Car insurance is a bit different to house insurance in that when you claim on your house insurance the vast majority of the time it is something outside of your control, like a storm blowing your roof off or a burst water pipe.
However, the typical car insurance claim does have something to do with the driver of the car. While it’s not always the case, the driver (and policyholder) can be at fault if they lost control of the car and crashed.
Naturally, some drivers are more likely to have accidents. For example, young inexperienced drivers are more likely to crash than a middle aged driver in say their 40s. Insurance companies will price this difference into their base premium rate calculation.
Even within these groups (i.e. under 25 year old drivers) there are subgroups of drivers that are more prone to accidents.
In general insurance companies try to balance long term claims payment trends between good and bad drivers. If someone uses their policy more and is paid out1 more insurance is it fair that they pay the same premium as someone that has never made a claim?
The way insurance companies try to gauge this is by assigning a Driver Grade to the person applying for the cover.
This is what they are trying to do when they ask you to disclose how many car insurance claims you have had in the last five years.
Why do we only care about claims in the last five years?
Don’t worry, we (and insurance companies in general) know and expect that the average driver is going to have a car insurance claim in their lifetime.
People’s driving habits change over time so how you drove 20 years ago is not likely to be reflective of how you drive today. Insurance companies realise it’s unrealistic too look too far back into the past. Someone that had three accidents all over 10 years ago does not reflect their driving today.
Therefore you will only be asked about claims in the last five years. If someone has had 3 accidents or claims in the last five years there is a good chance the driver is more dangerous than the average.
Do I pay an excess when I am not at fault?
If you are at fault for an accident, or admit liability you will need to pay your policy excess on your insurance payout.
If you are not at fault, and you have the details of another party who caused the crash and who admits liability its unlikely you will have to pay an excess.
Some particular items of your policy may not have an excess that applies to the cover. Examples include theft, or windscreen damage. You should check your policy for these.
In all other cases it’s most likely that you will have to pay your excess even if you’re not at fault. If you have a crash with another driver, but you are unable to get their details there’s no definitive proof of who was at fault, and you will generally have to pay the excess on your policy.
How do Insurance companies apply the Driver Grade?
Some insurance companies will ask you to only disclose claims where you were ‘at fault’. We ask you to disclose any claims where you were either at fault, or paid the excess on the policy. We are not saying that every claim where you have paid the excess is one that is your fault, but we are trying to offset and balance premiums between those that have used their policy for payouts, and those that have not. It’s only fair.