Bonus-malus

What it means

Bonus-malus is how an insurer prices claims history into a policy. Claim-free years cut the premium; a reported and paid claim raises it for several years to come.

It follows the vehicle keeper, not the driver. In a company fleet that means one accident feeds into the price of third-party cover and own-damage cover across the fleet.

Bonus-malus does not change what the insurer pays out on a claim, only the price in later years. The payout on a single insured event is the same for a keeper with a long bonus as for a newcomer; the difference shows only at renewal. There is no single scale either: each insurer runs its own ladder and its own way of recognising history from another company.

How it works in practice

At renewal it pays to ask the insurer for the claims record and put quotes against it. Without it a competing insurer prices on the worst assumption and the offer comes back dearer.

On a small loss, do the arithmetic before reporting. If the damage is near the excess, the premium increase over coming years usually exceeds the payout itself.

For a company fleet we put the claims record of every vehicle next to the premiums in the cost lines. If most claims come from a few cars or drivers, the first fix is internal, such as rules for using company cars. At renewal it is then worth bringing in an insurance broker with actual figures.

What to watch out for

Transferring a vehicle or changing the keeper within a group does not carry the history across. The new company starts with no bonus, which on a larger fleet means a step change in premium.

When switching insurer, companies often forget to ask for a claims history certificate. The new insurer cannot verify the record, puts the vehicles on the base step, and the company loses a bonus it was entitled to. Request the certificate whenever an insurance contract ends and file it with the vehicle’s papers.