Question: For the past six years, my wife and I insured our two cars on a scheme designed for the employees of a certain company. It offered preferential discounts and was arranged by a broker. There were no claims during the period.

I recently left the company and I was told that because I was on a company scheme I am not entitled to a no-claim bonus. Is this the practice in the industry and, if so, why? What if I was put on to a different insurance company wouldn't the fact that I had no claim in over six years make me and my wife eligible for some discount and how much? Do you think I could get a better rate if I went to a new broker?

I am being asked to pay the full premium with no-claim bonus by the existing broker. Is the issue of no-claim bonus a legal one (is it regulated) or is it entirely up to the policy of the company?

- GL, Kingston 5

Answer: Money is the main driver behind insurance affinity schemes - to use the correct name of these group-insurance plans.

They produce revenue for the broker and the insurer and lower insurance premiums for their members.

The scheme, as it is actually called locally, is a portfolio of premiums for a defined and "closely-connected group of individuals, companies, or organisations who have commonality of interest through their collective membership in the affinity group which they belong".

In the case of your family's motor insurance, you became a member of that group as an employee of a certain company.

Insurers set the premiums for affinity schemes differently than they do for an individual. In the latter case, they apply what they call 'book rates'.

These are based on such things as the type of vehicle, its value and the driving/insurance history of the drivers. After the 'book premium' has been calculated, the no-claim discount is subtracted.

Members of affinity schemes for motor vehicles do not always earn no-claim discounts.

Their premiums, in these cases, rise or fall on the claims experience of the group. If, at the end of 12 months, the total amount paid for claims and expenses exceeds the premiums, members will pay more - even those who had no accidents. Sometimes safe drivers end up subsidising those who are careless.

Find a different broker or contact another insurer. Ask them to give you a quotation for insuring you and your wife's cars. Tell them about your driving history and the fact that no claims occurred during six years.

Based on how the insurance market operates, you and your wife should be earning discounts of between 50 per cent and 70 per cent off the 'book rates' had you not been insured under the employer scheme.

One big motor insurer has told me that they have stopped writing affinity plans.

Most plans create losses, not profit.

Brokers make money

The company representative did not say so but it was implied that the major beneficiaries of schemes are brokers. They make money 'come rain or shine'.

I confess that I have always been very reluctant to place the driving skills and experience that I have developed over the years and my motor insurance history into a big pot with persons I do not know, or who may not exercise the same degree of care that I do while operating a motor vehicle.

Group motor-insurance plans have never made sense to me.

Cedric E. Stephens provides independent information and free advice about the management of risks and insurance. Email: aegis@cwjamaica.com or send a text (SMS) message to 812-7233.