Car Insurance bonuses: the bonus-malus system

Did you know that one of the most effective commercial tools of insurers to retain their customers is the  Car Insurance bonuses? . We are talking about the bonus malus system with which you can enjoy discounts if you have not registered claims for a long time or give parts to your insurer. Do you know how insurance bonuses work? Today we tell you how the insurance bonus is applied and how you can take advantage of it to pay less to insure the car.

The policy bonuses not only allow you to save a little money when insuring the car: they also help us all drive better. And it works for the company, because it helps to retain its customers.

But it goes even further, because by applying the bonus-malus it is possible to personalize the risk. In other words, the insurer can reward you for being a good driver and charge more to those who have more claims at the end of the year.

But how do car insurance rewards really work? Right now we explain it to you.

How Car Insurance Bonuses Work

Car insurance bonuses work according to a bonus-malus system with which discounts are granted in the renewal of the policy of vehicles that have a lower accident rate.

Based on an insurance price, the bonus will be designated to good drivers and the penalty to those who are not, in which case penalties may be applied to the base rate to be paid.

That means that the insurer, when it sees that you have not given parts in a certain period of time (which can be one, two, three or five years, depending on the insurer), applies a reduction to the price of your insurance at the time of the renovation.

And if claims accumulate in the same period, then you may find that the insurer points you a surcharge in the payment of the renewal of the policy.

Insurers apply bonuses differently from each other, with different discount percentages and with more or less long periods without parts.

There are insurers that have a progressive discount system, with which as the years go by without having a claim, the discount increases.

For example, it may happen that, for every year that passes without us giving a part, the policy costs us 5%. If we add years without parts, the discount percentage can increase and there are companies that reward their best drivers with a reduction of up to 60% in the price of insurance.

There is always a maximum limit on bonuses that is usually between 40% and 60%, depending on the company.

You can also find car insurance in which different bonuses are applied depending on the coverage contracted, with discounts of a greater or lesser amount depending on whether the policy corresponds to Third Party insurance, Extended Third Party insurance, or  All Risk.

Advantages of the car insurance bonus system

This car insurance bonus system has turned out to be a good idea that offers interesting advantages, both for customers and for insurers.

Reduction in the price of the policy

The advantage for customers is clear. If you are a driver who has been insuring the car for several years with the same company, you can accumulate bonuses up to the maximum possible. This saving in insurance renewal is automatic.

And, as we have pointed out, there are really interesting discounts with discounts and getting to pay less for Car Insurance.

Customize insurance

For companies, the bonus system allows policies to be customized based on the accident history of each driver.

In this way, the insurer adjusts the prices of the policy in each case, depending on each individual risk: Whoever has fewer accidents pays less and whoever has more pays more.

Loyalty to the best customers

Another fundamental reason for insurers to offer these discounts to customers with fewer claims is to retain the best policyholders in the company: those with no claims.

In fact, there are insurers that seek to attract good drivers by maintaining or increasing the bonuses applied by competing insurers.

Any insurance blog is interested in having clients that do not have parts in their portfolio. They are the most profitable policyholders and rewarding their car care with discounts is one way to avoid losing them. As you can see, everyone wins with this bonus system.

How the Car Insurance bonus is applied: what you should keep in mind

To find out if you can benefit from the bonus-malus system when renewing your car insurance, it is worth keeping a few things in mind.

It may be that you are entitled to a discount and that it has not been applied to you or that you realize that there are insurers that give more incentives to good drivers and you are interested in changing companies. That is why it is good to know this mechanism.

Know your insurance bonuses

The first thing you should check are the conditions that your insurer establishes to reward good drivers.

Each company applies bonuses and establishes its own rules and discounts. It is convenient that you inform yourself about the bonuses that your insurer applies to know the maximum discount that you can benefit from and under what conditions.

For example, an important detail to pay attention to is the number of years it takes to reach the maximum bonus .

It may be that the benefit is impossible to enjoy for the number of years that, in a certain company, it takes to reach the maximum. There are companies that allow you to enjoy the maximum bonus in five or six years and others that force you to spend twelve years without parts to get it. That’s a lot of time.

 Policyholder’s claim history

Whether or not you have a bonus depends on the claims you give. To find out if insuring your vehicle has a bonus, insurers collect information from a database called SINCO, produced by TIREA (Information Technologies and Networks for Insurance Entities), a statistical service dedicated to the insurance sector.

In this database, insurers can access the information of the policies and consult the history of claims of the insured when contracting new insurance for the car.

Specifically, when deciding whether the insurance bonus is applicable, the company looks at the claims history of the policyholder, not the vehicle.

Many people think that the driver of the vehicle or the owner is the one who can enjoy the bonus when in reality it is the policyholder, who is the one who signs the insurance contract and is responsible for paying the premium.

That is why, when determining whether or not there is a bonus in the policy, the insurer requires the policyholder’s ID, the policy number, and the car’s license plate. With these data, they can consult the SINCO statistics for the number of claims associated with the policyholder in recent years.

In this way, each insurer establishes its discount on the premium price, based on the parts received in recent years.

Are the bonuses maintained when changing insurance company?

Although the bonus system encourages customer loyalty to the insurer, the truth is that more and more insurers offer as a commercial claim the maintenance of bonuses when changing Auto Insurance. Others, however, no.

There are insurers that, after consulting the claims history of their new clients, have chosen to respect the bonuses they had in their previous company, as long as they do not exceed the maximum bonus established by the insurer.

Other companies prefer to set a maximum bonus for new clients and there are those that only apply bonuses to certain coverages. As you can see, the commercial policy of each insurer also takes advantage of this bonus-malus system and offers us elements to take into account when renewing Auto Insurance.

What if we change cars? By insuring the new car you do not lose the bonus

Indeed, to whom the insurance bonuses apply is the policyholder. It is true that the insured property is the car, but it is the policyholder who is responsible for the policy. Therefore, when changing cars, the insurer will respect the discount that corresponds to it for low claims.

Another thing is that, when changing a car for a more expensive or more powerful one, the insurer modifies the price of the premium. If the insured risk changes, the premium may vary, although the bonus and its discounts remain.

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