Explaining the NCD in Hong Kong

In Hong Kong, as well as in many other countries, motor insurers have a wide number of terms and conditions that people searching for motor insurance plans need to be aware of. One such term is the No Claims Discount, or NCD. This term is actually quite beneficial to drivers and is arguably one of the most important they should know, as it can have a direct impact on the premium they pay. This article sets out to explain the NCD and what drivers need to know about it.

Define: NCD

As stated above, NCD stands for No Claims Discount, and is a term insurers use to describe an important feature of car insurance policies. Plans with an NCD feature will give drivers a discount on their premium for each year they drive without submitting a claim.

The NCD, or No Claims Benefit (NCB) as it is known in some countries and plans, is one of the most unique car insurance benefits in Hong Kong, as virtually no other forms of insurance have a discount like this.

How does the NCD work?

As stated above, for every year you drive without submitting a claim, insurance providers will discount your premium by a certain percentage. In Hong Kong, the percentage works on an increasing scale with most providers offering a maximum of 60% discount. While it can be different among insurers, most providers in the city will offer a scale as follows:

• 20% reduction in premiums after the first year of claim free driving
• 30% reduction after the second year
• 40% after the third year
• 50% after the fourth year
• 60% after the fifth year  

It should be noted here that this scale is usually only applied to individual motor policies. If you are securing a plan where the vehicle will be used for work, or for commercial purposes, the NCD may be calculated differently, with most insurers offering a 10% reduction the first year if there are no accidents with a cap of 30% discount.

The key here is that the discount starts after the first full year of being insured. In most cases this will be 12 months after the date you secured the insurance. Should you have not submitted any claims by this period, most insurers will automatically apply this discount at the time of renewal if it is part of the policy.

Is there a way I can protect it?

This discount can prove to be a major cost savings, especially if you have driven for five years without an accident or claim, and, luckily, there are a number of things you can do to protect it.

First and most obvious, is to drive with care. In 2014 (according to the Hong Kong Transportation Department) there were 15,790 road accidents, 13,183 of which were slight. It is a high possibility that many of these were caused by distracted driving.

If you are driving while on your phone or distracted, your chances of having an accident increase immensely. For example, this study by the National Safety Council in the US found that you are four times more likely to crash if you are on the phone or texting. Combine this with poor driving habits, such as not signaling when turning, speeding or driving erratically, and your chances of being in an accident increase even further. Concentrating while driving and employing defensive driving techniques can lessen the chances of an accident.  

Another option offered by some car insurance providers is No Claims Discount Protection. As you probably guessed this is added protection that you can add to your plan (at a cost) that sees your earned discount protected should you be in an accident and need to submit a claim. One thing to be aware of with this type of protection is that it usually has a damage threshold. If the damage assessed is higher than this threshold, the protection will not be allowed. Beyond that, if you are in an accident and the damage is below the threshold your discount should remain, however you will likely have to pay a higher premium.

Finally, if you submit a claim we should note here that most motor insurance providers treat the No Claims Discount as a step-down scheme. What we mean by this is that your discount will not be completely erased after multiple years. For example, if you have driven 4 years without an accident and then submit a claim, your NCD discount % will be knocked down to the 3-year level. If you are not at fault for the claim, e.g., you are rear-ended at a red light and the other driver is deemed to be at fault, most providers will also not reduce your discount as you are not at fault.      

I have a NCD with my existing plan, can I take it with me to a new plan?

One of the more useful features of the NCD is that almost all insurers honor it. In other words, if you have a NCD with one provider and move to another provider or vehicle, the discount should move with you. What you will need is proof that you have this discount with your existing provider, which can usually be a written letter that displays the percentage discount and the length of time you have gone without submitting a claim. Many policy documents will also have the percentage, so this should work as well.

Interestingly, if you are coming from overseas and have a NCD in your home country, there are providers here in Hong Kong who will allow you to transfer the discount. If you would like to learn more about the NCD and how you can apply it to your plan, or how you can secure a plan that will honor your existing discount percentage, please contact our car insurance experts today for a free quote.