The Illusion of NCD Protection
What is No Claims-Discount (NCD)

Let us first begin by covering the most common and accepted definition of No Claims Discount(NCD). It is an entitlement given to you if no claim has been made under your policy for a year or more with the current/existing insurer. It reduces the premium you have to pay for the following year and is the only common and approved standard followed by all insurers, and are thus transferable across Insurers.

In simple terms, after 5 years of no at-fault accident, your car insurance premium halves.

For Private cars

Period of insurance with no claim Discount on renewal
1 year 10%
2 years 20%
3 years 30%
4 years 40%
5 years or longer 50%
What happens to your NCD after a claim?

If there is a claim made under the policy, your NCD will be reduced as follows.

For Private cars

Current NCD NCD after 1 claim
50% 20%
40% 10%
30% and under 0%

(Not applicable if you are found to be totally not at-fault).

Your NCD will be reduced by 30% for each at-fault accident. Hence if you made more than 2 claims within a policy year, your NCD will be reduced to 0%.

NCD was a stroke of brilliance by its creator. The cumulative effect made people become attached to it, and not want to lose it. It is like a badge of honour, to let others know that you are a good driver. And not having it indirectly meant that your are perceived as otherwise.

NCD has become something highly coveted by drivers in Singapore.

This is no Protection on the premium you pay for car insurance!

To capitalise on this, Insurers started getting creative on NCD. They started offering protection, making you pay extra for it. NCD for life? Only if you stay insured with that insurer for life. 60% NCD? Only if you stay with that insurer forever. All the NCD derivations are not standardised nor approved standards by the regulators, and are only offerings by specific insurers, thus Non-Transferable.

NCD Protector Protects your NCD at 50% even if you had an at-fault accident
NCD for Life Maintain your NCD at 50% for life even if you had an at-fault accident
60% NCD Extra 10% above 50% NCD
Non-Transferable is the disclaimer they do not want you to know

What is Non-Transferable? That means the benefit only applies if you stay with that insurer, and ceases if you switch, locking you with that existing insurer. Don’t want to lose your NCD? Be at our mercy for renewal premium.

Every Insurance contract will state clearly in fine print that they reserve the right to adjust your base premium on renewal. So, if you were paying $1,000 on 50% NCD, they have every right to charge you $3,000 on 50% NCD after an at-fault accident claim, because they increased the base premium. This is something that is not highlighted when they sell the car insurance to you.

So what should I do on renewal?

It is always best to consult with your insurance broker, as to which insurer is suitable for your profile. They will be in a better position to give you a realistic estimate of any potential loading on your renewal insurance premium in the event of an accident.

Had an at-fault accident? It might be worthwhile to shop around and compare your 50% “NCD protected” renewal premium, against other insurers who are offering you only 20% discount.

You might be surprised: a 20% premium discount might work out to be cheaper than your existing 50%  NCD premium.

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