Here at Kwiksure, we receive inquiries about the No Claims Discount (NCD) every day. Indeed, it’s one of the most popular insurance benefits for drivers. However, behind the seemingly self-explanatory name, there are some finer details that even experienced drivers might not be aware of.
In this post, we will spell out how the No Claims Discount works and some important, related facts for you to get a clearer picture on the subject.
Definition of NCD
NCDs, aka No Claims Discounts, is a premium discount offered to policyholders for every year of driving claims-free. Originally known as No Claims Bonus (NCB), the name was subsequently changed to reflect its nature clearer - it does not give the policyholder any extra money, but rather reduces their premium the following year.
For private car insurance
In Hong Kong, the NCD usually takes on an increasing percentage scale. Although discount rates vary among different insurers, most providers offer a cap of 60% off the policyholder's annual premium.
Below is a typical example of how NCDs are applied to private car insurance premiums in Hong Kong:
1 year of claims-free driving: 20% NCD
2 years of claims-free driving: 30% NCD
3 years of claims-free driving: 40% NCD
4 years of claims-free driving: 50% NCD
5 years of claims-free driving: 60% NCD
For commercial motor insurance
In contrast with individual motor insurance, vehicles used for work or commercial purposes are calculated differently, with the maximum discount being 30%. Here’s an example of how NCDs are typically applied to commercial motor insurance premiums in Hong Kong:
1 year of claims-free driving: 10% NCD
2 years of claims-free driving: 20% NCD
3 years of claims-free driving: 30% NCD
Important facts about the No Claims Discount
NCDs are transferable under specific conditions
Transferring from a local insurer
NCDs are common benefits provided by virtually all motor insurers in Hong Kong. As such, when you switch from one provider to another, you can in most cases enjoy the same NCD. All you have to do is provide proof that you are eligible to this discount with the current provider - it can either be in the form of a written confirmation, or stated in the policy document. Just make sure that your NCD and the length of claims-free period are clearly stated.
Transferring from an overseas insurer
For newly arrived expats, the process of transferring NCDs is more or less the same. To enjoy the same NCD with a new insurer, you need to obtain a certificate of insurance from your previous insurer to verify that you didn’t make any claims over the last 12 months.
Transferring from commercial to personal vehicles
You can transfer the NCD from your company car to your private car. To do this, you have to obtain a letter of consent for NCD transferal from your employer or authorized representative.
Transferring between vehicle types
NCDs are not transferable when you switch between different vehicle types. For example, if you trade in your van for a motorcycle, your NCD will be reset to 0%.
Transferring between vehicles under your name
If you own multiple vehicles, you’ll have a No Claims record for each of them, and it’s possible to transfer your No Claims Discount from one vehicle to another.
Transferring between vehicles under different names
If you’re selling your vehicle, the NCD will stay with you and the buyer won’t be entitled to your NCD.
Transferring as a named driver
If you’re driving exclusively behind the wheel of a company-owned car, or are a named driver of another insurance policy, you won’t be able to build up any No Claims record in the first place so there’s no NCD that you can transfer.
Some insurers provide NCD protection which can be added to your plan (at a cost). In this way, even if you need to make a claim after an accident, you’ll still be entitled to your original No Claims Discount at renewal. However, it’s worth noting that this type of protection has its damage threshold. Only if the damage assessed doesn’t exceed the threshold will you be allowed to use the protection. Additionally, NCD protection cannot be transferred to another insurer.
NCD step-back system
Most motor insurers treat the No Claims Discount as a step-down scheme, which means that your discount won’t be eliminated with a single claim. Instead, your NCD will be lowered everytime you lodge a claim. For instance, if a driver with a 50% NCD (representing four years of claim-free driving) submits a claim, he/she will only be eligible to a 20% NCD when they renew their policy, regardless of whether he/she is at fault for the incident.
In addition, this 'step back' system is only applicable to private vehicles. Other types of vehicles will lose their NCD entirely at renewal upon a single claim.
NCDs can expire
Depending on the insurer, NCDs will expire 12/24 months after the cancellation or end of a policy. If you sell your vehicle and don’t transfer the NCD over to your new policy, the insurer will void your NCD.
Claiming is optional
Although you should report to your insurer for all accidents within 24 hours, whether to claim the costs against your insurance is entirely up to you. Some drivers will weigh settling the costs privately and losing the No Claims Discount in order to save more money. This can be the best option if you have a high NCD, as it will mean that you won't have to forego your big premium discount for the repair costs of minor property damage.
Stay informed with Kwiksure!
There’s indeed much to cover on the topic of motor insurance, and the No Claims Discount is just one small part of it. It’s an onerous task to search for the right policy without the assistance of an established broker like Kwiksure; Our team of experts are on hand to help you make the most informed decision. Contact us today to get a free quote and plan comparison!