No-claims discount/bonus (NCD/NCB) calculation methods + FAQs 2024
If you drive or own a vehicle in Hong Kong, surely you must have seen the terms NCD/NCB/no-claims discount in your car insurance documents, but how can you qualify for this premium discount? How is NCD calculated? Under what circumstances will your NCD not be extended? The experts at Kwiksure will answer these questions, and more, in detail for you here.
NCD/NCB explained ｜ How NCD/NCB is calculated
How will making a claim reduce my NCD/NCB? ｜ Can my NCD/NCB be transferred?
What is NCD protection?｜Should I claim compensation after an accident?
No-claims discount (NCD/NCB) explained
As the name implies, NCD/NCB means that when a policyholder has not made a claim for a period of time (in years), the insurer will provide a premium discount of a corresponding percentage when the policy is renewed in the following year, usually 20% - 60%.
NCD/NCB used to be unique to auto insurance, but it was later applied to other insurance categories as well, such as medical insurance. NCD and NCB are actually the same thing, but insurers now use "no-claims discount/NCD" to highlight its discount nature and prevent policyholders from thinking that their insurer will offer monetary rewards.
Since NCD can significantly reduce your annual car insurance premiums, you should clearly state how much NCD you have when getting a car insurance quote to ensure that the quote is accurate.
NCD calculation method
The NCD discount rate varies from one insurer to another, but it increases year-on-year from 20% all the way up to a maximum of 60%. The calculation method of the NCD is also slightly different for private cars, motorcycles, and commercial vehicles. The latter starts at 10% and gradually reaches a maximum of 30%.
NCD for private cars/motorcycles/commercial vehicles
|
Year |
NCD for private cars |
NCD for motorcycles and commercial vehicles |
|
1st year of driving without claims |
20% |
10% |
|
2nd consecutive year of driving without claims |
30% |
20% |
|
3rd consecutive year of driving without claims |
40% |
30% |
|
4th consecutive year of driving without claims |
50% |
30% |
|
5th consecutive year of driving without claims |
60% |
30% |
Related article: Car License Renewal: Application Process, License Fees and Documents
How will making a claim reduce my NCD?
1. Under the following circumstances, your NCD will be reset to zero when you renew your policy the following year:
- If you make 1 claim in the policy year while having 40% NCD or less
- If you make 2 claims in the policy year while having 50%/60% NCD
2. Under the following circumstance, your NCD will be reduced when you renew your policy in the following year:
- If you make 1 claim in the policy year while having 50%/60% NCD, your insurer will deduct a part of your NCD following their “discount reduction mechanism”.
- 60% NCD becomes 30% at the following year’s renewal
- 50% NCD becomes 20% at the following year’s renewal
Keep in mind that the above NCD "discount reduction mechanism" typically applies only to private cars. With other types of vehicles, the NDC will typically be lost in the following year, provided a claim has been made.
Is NCD transferable?
Transfer from a local insurer
If you want to switch insurers, you only need to purchase a new policy within 12 months of the end or cancellation of the old policy, and provide proof of your original NCD (such as your old policy), you will then have an opportunity to transfer your NCD to the new insurer. However, the method for calculating NCD may be different for each insurer.
Transfer from an overseas insurer
For foreigners who have just arrived in Hong Kong, the steps for transferring NCD are similar. To enjoy the same NCD with your new insurer, you will need to ask your previous insurer for a certificate of insurance certifying that you have not claimed over the past twelve months.
Transfer from a commercial vehicle to a private vehicle
You can transfer the NCD from your company vehicle to your own car. All you need to do is obtain a written NCD transfer agreement from your employer or its approved representative.
Transfer between different vehicle classes
NCD cannot be transferred between vehicles of different classes. For example, if you sell your van and get a motorcycle, your NCD will reset to 0%.
Transfer to another vehicle under your name
NCD is attached to people, not vehicles. If you own multiple vehicles, each will have its own NCD, which you can transfer from one car to another.
Transfer to a vehicle under a different name
Since NCD is attached to people, not vehicles. Even if you sell your car to someone else, you will keep your NCD, and the buyer of your vehicle will not have your NCD.
Transfer NCD as a named driver
If you mostly drive a company car, or are a named driver of another policy, you will not have a no-claims history, and accordingly, you will not have an NCD to transfer.
What is NCD protection?
Some insurers will provide no-claims discount protection (NCD protection) that you can add to your policy (additional charges apply). After purchasing NCD protection, even if you need to claim compensation after an accident, you can still enjoy your original NCD. However, there is a cap on this type of protection, and protection is effective only if the assessed amount of compensation is not over this cap. Plus, NCD protection is not transferable to other insurers.
Should I claim compensation after an accident?
Although you should notify your insurer or intermediary within 24 hours of a traffic accident and fill in an accident report form, it is up to you, as the owner of the vehicle, to decide whether to claim compensation from your insurer.
Some drivers will compare the amount they will need to pay in a private settlement to what they stand to lose if they forfeit their NCD (or part of it), and pick the option leading to a smaller overall loss. If you have a high NCD, a private settlement is the wiser thing to do, as you want to avoid getting a small compensation to cover the repair cost for some minor damage, only to lose out on a nice premium discount.
If there are no casualties in a road accident, and it is only a minor collision, consider settling privately with the other party, and sign a traffic accident settlement agreement.
On the other hand, we do not recommend a private settlement between the two parties if casualties are involved. This is because even if the two parties have signed a traffic accident settlement agreement, the other party could suddenly change his mind later and demand a huge amount of compensation from you.
Related reading:
How to handle a car crash in Hong Kong
2022 Towing cost strategy, process, and price-affecting factors
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