Understanding NCD and How It Can Help You Save on Motor Insurance Premium
In our previous article on Motor insurance, we covered the basics of this class of insurance where we explained the 3 common types and their coverages. In this article we will be talking about an important component in motor insurance that we all need to understand so that we are able to take full advantage of the benefits offered by our insurance policy. The component that we are referring to here is the Non-Claim Discount in insurance, or better known as NCD.
What is NCD?
Non Claim Discount, as the name suggests, is a discount, or a kind of reward system, awarded to the policy holder during renewal of motor insurance policy if no claims have been made during the previous 12 months of coverage. So what this means is that, if you have not made any claims against your policy during the whole of 12-month period, upon the next motor insurance policy renewal, you are entitled to a discount!
How much discount?
Discount is great, but how much exactly? Well it depends on the type of vehicle in question. Private vehicles enjoy more discount compared to commercial vehicles and motorcycles. Below is a table that shows the discount rates based on type of vehicle and the period of insurance. This is a fixed rate determined by Persatuan Insurans Am Malaysia (PIAM) and therefore is the same across all insurance companies in Malaysia.
NCD Rates based on Vehicle Types and Period of Insurance
How NCD in insurance works:
To be entitled to this discount, you would need to have at least a 12-month claim-free insurance period, which means that, if you are purchasing a motor insurance for the first time, you will not yet get any discount until you are renewing the policy a year after. In which case, you will be given a 25% discount (presuming that you are renewing for a private car). To further illustrate on NCD, let’s say you still have yet to make any claims after the 2nd year (i.e. no claims for consecutive 24 months), upon your next renewal, you will get a 30% discount.
So what happens when you finally do make a claim? For instance, during your 3rd year, there has been an accident in which you had to claim from your insurance for the cost of repair. In this case, the next time you renew your policy, you will no longer get a discount (discount reverts back to 0% as seen at the top of the table above) and you will need to pay your premium in full. You will be entitled to a discount again if you go on another 12-month claim-free period, and the discount rate will start from 25%.
Some important factors to note regarding NCD:
No-Fault Damage
You will not lose your NCD if claims were made against your policy for accident that was not your fault. For instance, you are involved in an accident which you are not at fault. You can either claim against the other party’s Third Party Policy or against your own Comprehensive Policy for faster claim process and suffer no loss in NCD.
NCD is Transferable
NCD is in fact applied to the policy holder and not to the car insured. Therefore if you have an NCD of 30% and you decided to sell your existing car and purchase a new one, you still retain your NCD (of 30%) which can be transferred to the new car.
However, if you are purchasing a new car, and keeping the existing one, then the new car’s NCD would start with 0% as you are not able to apply the same NCD on both car. We do advise that if you have more than one car, you should transfer the higher NCD to the more expensive (higher market value) car to gain more savings on premium.
Changing of Insurer
In the event you decide to renew your motor insurance policy with a new insurer, your NCD should apply to the new policy provided by this new insurer. NCD is something that is regulated and not set by the insurance company and therefore, it is applicable no matter which insurance company you purchase your motor insurance policy from.
Windscreen Cover
Windscreen policy is an add-on cover to your motor policy. Many people opt to purchase this considering how expensive it is to have a windscreen replaced. If you have windscreen insurance, then the insurance company will pay for any repair or replacement without you losing your NCD. However, if you do not have windscreen insurance and you claim, then you will lose your NCD. Here it makes sense to check what is better for you. A qualified insurance agent can help you with that decision. We will explain further with examples below.
How to take advantage of NCD?
Sometimes it is worth paying for the repair cost instead of making a claim against your policy. Doing so will help you retain your NCD. This applies when the repair cost is small and when the savings on your premium cost from your NCD is greater than the repair cost itself. Therefore, it is good to be aware of how much premium you are paying. As well as how much savings in terms of NCD you are getting to allow you to make a better decision. Here are some examples:
If you do not have windscreen cover / insurance:
Example: The repair cost for your windscreen is RM 500. You have 55% NCD that saves you RM600.
Solution: You should not claim against your insurance company, but pay the windscreen repair yourself. When you renew your insurance, you will have saved RM 100. But that isn’t all. You get further savings the following year (if there had not been any claim) since your NCD is retained.
But what if the repair cost is the same as the savings from NCD for that year? We would still suggest that you pay for the repair yourself. Since the savings you will get from NCD is more valuable.
If you have windscreen cover / insurance:
No effect on your NCD. So just inform your insurer and go ahead and repair your windscreen!
Be a smart consumer. Understand your policies well. This can protect your rights as a policy holder, as well as save you money and unnecessary cost. Always have your insurer’s care line stored in your phone. Make use of this service in case you have any doubt or inquiry regarding your policy. Insurance can be complicated and good advice is hard to come by. Should you need to find a trusted agent, our insurance agent directory can help locate one near you.
Ady
July 18, 2017 3:36 pmMy car insurance is valid from 06/08/2016 ~ 05/08/2017. When I bought new can somewhere in early September 2016, I decided to withdraw the NCD from my current car to new car. When I wan t to renew the insurance for my old car, is it the NCD still 0% or become 25%?
Selina
August 9, 2017 4:01 pmHi Ady. For you to get an increment in NCD it has to be in affect for 365 days. So in this case, it will only have been 11 months, so it should still be 0% at the next renewal.
Should you have more question, you can direct them here: http://www.forum.ibanding.my
Shans
November 21, 2017 3:35 pmI have 2 cars, saga and persona. Persona does not have NCD so can I transfer saga’s NCD to persona?
luke
November 24, 2017 1:15 pmYes, you can transfer NCD. Many customer do that to switch existing NCD to new car, because new car has higher insurance premium. Best time is during renewal. First you request to remove NCD from Saga. Then you can ask to use NCD for Persona. Best to do, during renewal of Persona.
dean
January 12, 2018 10:54 pmI am about to renew my motorcycle insurance. Last year NCD is 15% with insurer A. Does NCD reset to 0% if i change to new insurer B?
luke
January 15, 2018 1:18 pmNo, the NCD does not reset to 0%. You can carry over your NCD to the new insurance company. You just need to make sure that the start date is correctly set for your insurance with the new insurance company.
wt
June 5, 2018 6:16 amHi. I plan to sell my current car (NCD 55%) in June 2018. If I will only be buying a new car 1 year later (eg. June 2019), can the NCD 55% still be applicable to the new car then? What would the NCD transfer process be like in this case? Is there a time limit before the NCD “expires” if not used?
Thanks!
luke
June 5, 2018 11:56 amIf you do not use it immediately, your NCD will drop one level down, so in your case 45%. When you buy your new car, you transfer the NCD of the old vehicle to the new car. Your NCD is linked to your vehicle number and IC.
SK
June 11, 2018 2:14 pmHi, my car insurance is expiring on 17 July 2018 with 38.33%. If i change a new car now (before 17 July 2018), my NCD will be 38.33% until June 2019? I am selling off the old car.
luke
June 11, 2018 2:32 pmYou can cancel the NCD on your old car and transfer the 38.33% to your new car. Once, you have been on 38.33% NCD for 365 days (you need to proof it to the company), you can request an endorsement to go to next level of NCD. You do not need to wait until June 2019.
David Lee
June 12, 2018 9:05 pmDoes motorcycle ncd transfable to car?
luke
June 19, 2018 10:21 pmHi David,
no motorcycle ncd cannot be transferred to the car.
Hasan Wazani
July 6, 2018 6:41 pmIf NCD is linked to car registration number, what if i sell my current car (with NCD 55%) and dont purchase any new car.. Meaning the car registration number sold. Will the NCD be gone?
Selina
July 7, 2018 8:32 amHi Hasan. The Ncd remains valid and can be transferred later because it is linked to vehicle number and your Ic.
However, if not used for 365 days after car is sold, the NCD will drop down to the next discount level. It can still be used though
gt
July 9, 2018 12:04 ammy motorcycle current ncd is 25% on 1st party, what happen if i change to 2nd party with same insurance company? will ncd start with 0%??
luke
July 9, 2018 10:22 amYou can transfer your NCD. Your 2nd motorcycle will start with 25% and your first with 0%.