When it comes to auto insurance prices in Singapore, regardless of the base premium actually being considered on paper, the amount paid from one driver to the next can fluctuate wildly. The reason for this can be summarized in two different discounts that can be applied to a driver’s premium. One of them is the No-Claim Discount, also known as the No-Claim Bonus.

To have a better idea of how this works, let’s have a look at Jonas and Peterson.

Jonas is an overly responsible driver, not that you can be too careful on the road. Not only does he have a clean track record, but he also hasn’t made a claim on his car insurance in over 5 years.

Peterson is also a responsible driver, in fact his track record was identical to Jonas’ up until recently; however, he’s had some bad luck lately resulting in some minor accidents last month.

Jonas pays a premium of about $1,400, while Peterson pays a whopping $2,800. The reason Jonas is paying about half as much as Peterson, even though the latter used to have a similar track record, is thanks to the No-Claim Discount.

What is a No-Claim Discount exactly?

A No-Claim Discount (NCD) is a discount awarded to drivers who have accumulated a period of time without making any claims on their motor insurance. This discount usually ranges from 10% up to 50% (or none at all) and will be relative to the amount of time covered without any claim.

How can I get a No-Claim Discount?

For every year you’ve had your car insurance free of claims you’ll be rewarded with a 10% discount, up to a limit of 5 years equal to a 50% off the premium. This discount is usually transferable from one insurer to the next; however two different vehicles belonging to one owner have different NCD track records despite having the same proprietor.

What sort of situations do I have to lookout for to keep my NCD safe?

In order to keep your NCD from being jeopardized, you’ll have to avoid traffic accidents that might give rise to a claim on your motor insurance company.

Keep in mind that an NCD will be lost if any claim is made in which the cost of repairing or replacing the vehicle can’t be recouped from some other source. In other words, if you happen to be in an accident and one of other parties involved does not accept full responsibility of the incident, you will most likely lose your NCD status as the auto insurance company is obligated to cover the losses.

These incidents may not even be related to traffic accidents at all, such as a stolen or vandalized vehicle, or might not even have a third party involved such as a vehicle damaged or lost due to the driver falling asleep on the wheel.

Sounds really easy to lose. Is there any way I can protect my No-Claim Discount?

As we just saw with Jonas and Peterson, maintaining a No-Claim Discount is extremely important in order to minimize the premium costs of auto insurance in Singapore. With his NCD lost, Peterson may no longer be able to maintain his insurance plan, being forced to either get cheaper coverage or to look elsewhere for lower prices, meanwhile Jonas’ premium may well be within his budget.

Because of the overwhelming importance of such a discount to the clients, auto insurance companies in Singapore usually offer two levels of protection for car owners who happen to have reached the full 5 year reward.

First Level of Protection

If car owners wish to, they can hire a first level of protection from motor insurance companies which will keep their NCD from being affected if they happen to be involved in a single accident during that period.

This means that if Jonas pays for this level of protection and then has an accident, his car insurance policy will be exempt from NCD loss and he will keep his 50% discount, yet if the accident repeats itself, he will no longer be shielded. This protection is non transferable and usually costs an additional 10% on the premium charged by the car insurance.

Second level of Protection

A second level of protection is given by motor insurance companies to drivers who have reached the 5 year reward. If the driver happens to be involved in a claim, he will lose the rights to 3 years of rewards, meaning that his discount will be reduced to 20%. Any further incidents will reduce the No-Claims Discount on his car insurance to 0%. This is most likely what happened to Peterson, after being involved in one too many accidents, his NCD has become null.

Protecting your No-Claim Discount doesn’t mean that your premium won’t rise, however. Always remember that although your NCD might not have been affected by a claim, your track record indeed has. As a result, your base premium will still rise after each incident.