The Illusion of No-Claim Discount Protection

Let's start by clarifying what No-Claim Discount (NCD) means. 

The most common and widely recognised definition of NCD is: it's a benefit granted given to a driver if no insurance claim has been made under your policy for a year or more with the current/existing insurer. In essence, it's a reward for safe and accident-free driving.

Each year without getting into accidents earns you an increasing discount, which is then applied when you renew your car insurance for the next policy year. This basically reduces the insurance premium you pay for the following year, helping you save money!

Drivers of private cars can accumulate up to 50% NCD over five years, if they do not have an “at-fault” accident. Their car insurance premium should be half what it was before. 

This practice is the only universally accepted and standardised approach that all insurance providers adhere to. It is also transferable across insurers. 

NCD for private cars:

However, in the unfortunate event that you do have to make a claim under your policy, your NCD will be reduced as shown in the table below. (This is not applicable if you are found to be totally not at-fault.)

NCD after claims for private cars:

Your NCD will be reduced by 30% for each at-fault accident. Hence if you made more than 2 claims within a policy year, your NCD will be reduced to 0%. 

eazy's take on it.

We see the concept of NCD as a stroke of brilliance by its creator. The cumulative effect has made drivers become attached to it, creating a culture of drivers who don't want to lose what NCD they have already accumulated. It serves as a badge of honour - letting others, and insurers, know that you are a safe driver who is unlikely to make a claim. 

NCD has become something highly coveted by drivers in Singapore. 

This is no protection on the premium you pay for car insurance! 

To capitalise on this, insurers have started getting creative on how their own versions of NCD works. For example, you might see this chart on an insurer's website:

You can think of the No Claim Discount Protector as insurance for your NCD, to prevent you from losing the discount you have accumulated over the years. 

However, there's a catch – it's only applicable as long as you stick with the same insurer. These NCD variations and “protections” aren't standardised or regulated. They are unique to specific insurance companies. 

What they don't want you to know: It is non-transferrable across insurers.

It means that your NCD benefit remains in effect only if you continue with that particular insurer, and it ceases if you decide to switch insurers. In essence, you're tied to your current insurer if you want to safeguard your NCD, and you are at the insurer's mercy for renewal premium. 

It's important to note that in every insurance contract, there's typically a provision in the fine print that allows the insurer to adjust your base premium upon renewal. This means that, for example, if you were originally paying $1,000 with a 50% NCD, they have the authority to increase the cost to $3,000 while still maintaining the 50% NCD after you make an at-fault accident claim. 

This is easily achieved because they increased your base premium. This aspect is often not prominently highlighted when you purchase your car insurance policy.

So what should I do when it's time to renew my motor insurance? 

It is always best to consult with your insurance broker when you are considering renewal. They can assess your specific profile and individual requirements and help you determine which insurer is the most suitable. Brokers are well-equipped to provide you with a realistic estimate of any potential premium increase for your insurance renewal in the event of an accident.

If you've had an at-fault accident, it could be worth your while to explore other options. Compare your 50% "NCD protected" renewal premium against quotes from insurers who offer only a 20% discount. You might be surprised to find that a 20% premium discount from a different insurer could turn out to be more cost-effective than sticking with your existing 50% NCD premium.

Get insured with the right help.

Having an expert on your side to help you pick the right insurance plan and find the best price can be a big help. If you need help finding the right insurance coverage, consider working with an experienced broker like eazy. Our team can advise you on various insurance plans, including motor, health, corporate, lifestyle, and marine coverage. Speak to us today to get your insurance needs covered.