No claim bonus and rating 1 explained: what a claim really costs

A no claim bonus (NCB), often shown as a rating such as "rating 1", is a discount on your car insurance premium that grows each year you do not make an at-fault claim. An at-fault claim usually drops you down the scale, and the higher premium can last several years, so the real cost of a claim is often the excess plus several years of lost discount. Not-at-fault claims where the other driver is identified usually do not affect the NCB. Some insurers offer NCB protection for an extra cost, some give long-term customers a lifetime rating, and some do not use an NCB scale at all.

This guide sits in the renewal checklist section.

How the scale works

Each insurer sets its own scale, and the details are in the PDS or on its website. A typical structure:

Feature	How it commonly works
Starting point	New drivers start at a low discount; drivers with experience and no recent claims start higher
Annual step	One step up for each claim-free year
Maximum	The top step, often called rating 1, gives the largest discount
At-fault claim	Drops you one or more steps at the next renewal
Not-at-fault claim with identified driver	Usually no effect
Claims where no one can be identified (hit and run, hail)	Depends on the insurer; some treat weather claims as not affecting NCB
Protection option	Lets you make a set number of at-fault claims without losing your rating
Lifetime rating 1	Some insurers offer it after a number of years at rating 1 with conditions

Because the scale belongs to the insurer, a rating with one insurer does not automatically mean the same discount with another. New insurers usually ask about your claims history and rate you on that.

What one at-fault claim can cost (illustrative)

Suppose your premium before any NCB discount would be $2,000, and the scale gives these illustrative discounts:

Rating step	Discount	Premium
Rating 1	60%	$800
One step down	50%	$1,000
Two steps down	40%	$1,200

You are on rating 1 and make an at-fault claim for $2,300 with an $800 excess. Assume the claim drops you two steps, and you then climb one step per claim-free year.

Year	Rating	Premium	Extra premium vs staying at rating 1
1 (after claim)	Two steps down	$1,200	$400
2	One step down	$1,000	$200
3	Rating 1	$800	$0

Total cost of the claim to you: $800 excess + $600 extra premium = $1,400. The insurer paid $2,300 - $800 = $1,500, but $600 of that came back to it as extra premium, so the net benefit of claiming was $900, not $1,500. On these numbers claiming was still worth it: paying the $2,300 repair yourself would have cost $900 more. For a repair of around $1,400 or less, paying privately would have been cheaper.

The real scale, the premium before discount and how fast you climb back differ between insurers, and premiums change for other reasons too. Ask your insurer how a specific claim would affect your rating before you lodge it, if you are unsure.

Should you pay small claims yourself?

A rough test: if the repair cost minus your excess is less than the extra premium you would pay over the next few years, paying privately may be cheaper. In the example above, the extra premium was $600, so a repair of up to about $800 + $600 = $1,400 is cheaper to pay yourself.

Two cautions:

Report the accident to your insurer anyway if your policy requires it, even if you do not claim. Failing to tell the insurer about an incident that later becomes a claim, for example when the other driver claims against you, can cause problems.
Third party damage can grow. If someone else's car or property was damaged, their costs may be higher than they first appear. Talk to your insurer before agreeing to pay anyone directly.

Is NCB protection worth buying?

Worked example (illustrative)

NCB protection costs $65 a year. Without it, one at-fault claim costs $600 in lost discount (from the example above).

Break-even: $600 / $65 = 9.2 years. If you expect an at-fault claim more often than about once a decade, protection pays off on average. It is also worth more when your full premium is high, because the lost discount is a larger dollar amount. Read the conditions: protection usually covers one claim per period, and premiums can still rise for other reasons.

Moving insurer with a good rating

When you switch, the new insurer will ask about your claims and driving history and may ask for proof of your rating. Keep your certificate of insurance or ask your old insurer for a letter confirming your claims history. Some insurers offer to recognise a rating from another insurer; others ignore the label and price from your history. See switching insurer mid-term.

Common mistakes

Claiming for a small dent and losing more in discount than the claim was worth.
Assuming a hail claim or a hit and run will not affect the rating without checking.
Not keeping proof of claims history when leaving an insurer.
Comparing an NCB-protected quote with an unprotected one as if they were identical.

Before comparing, line up the excess as well, using choosing your excess.

Frequently asked questions

Does a windscreen claim affect my no claim bonus?

Many insurers do not count glass-only claims against the rating, especially if you hold a windscreen option. Check your PDS.

Can a young driver have rating 1?

Usually not straight away, because ratings build with claim-free years. Some insurers allow a young driver to start with a parent's rating as a listed driver; terms vary.

Does NCB apply to third party property policies?

Many insurers apply NCB to all cover levels, but some do not. Check the PDS.

If I sell my car, do I keep my rating?

Your claims history stays with you. Ask your insurer for written confirmation when you cancel.

Sources

Moneysmart — no claim bonus and car insurance costs
ASIC — insurance disclosure
Australian Financial Complaints Authority — disputes about fault decisions