Understanding NCD and How It Can Help You Save on Motor Insurance Premium

In our previous article on Motor insurance, we covered the basics of this class of insurance where we explained the 3 common types and their coverages. In this article we will be talking about an important component in motor insurance that we all need to understand so that we are able to take full advantage of the benefits offered by our insurance policy. The component that we are referring to here is the Non-Claim Discount in insurance, or better known as NCD.

What is NCD?

Non Claim Discount, as the name suggests, is a discount, or a kind of reward system, awarded to the policy holder during renewal of motor insurance policy if no claims have been made during the previous 12 months of coverage. So what this means is that, if you have not made any claims against your policy during the whole of 12-month period, upon the next motor insurance policy renewal, you are entitled to a discount!

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How much discount?

Discount is great, but how much exactly? Well it depends on the type of vehicle in question. Private vehicles enjoy more discount compared to commercial vehicles and motorcycles. Below is a table that shows the discount rates based on type of vehicle and the period of insurance. This is a fixed rate determined by Persatuan Insurans Am Malaysia (PIAM) and therefore is the same across all insurance companies in Malaysia.

NCD Rates based on Vehicle Types and Period of Insurance

How NCD in insurance works:

To be entitled to this discount, you would need to have at least a 12-month claim-free insurance period, which means that, if you are purchasing a motor insurance for the first time, you will not yet get any discount until you are renewing the policy a year after. In which case, you will be given a 25% discount (presuming that you are renewing for a private car). To further illustrate on NCD, let’s say you still have yet to make any claims after the 2nd year (i.e. no claims for consecutive 24 months), upon your next renewal, you will get a 30% discount.

So what happens when you finally do make a claim? For instance, during your 3rd year, there has been an accident in which you had to claim from your insurance for the cost of repair. In this case, the next time you renew your policy, you will no longer get a discount (discount reverts back to 0% as seen at the top of the table above) and you will need to pay your premium in full. You will be entitled to a discount again if you go on another 12-month claim-free period, and the discount rate will start from 25%.


Some important factors to note regarding NCD:

No-Fault Damage

You will not lose your NCD if claims were made against your policy for accident that was not your fault. For instance, you are involved in an accident which you are not at fault. You can either claim against the other party’s Third Party Policy or against your own Comprehensive Policy for faster claim process and suffer no loss in NCD.

NCD is Transferable

NCD is in fact applied to the policy holder and not to the car insured. Therefore if you have an NCD of 30% and you decided to sell your existing car and purchase a new one, you still retain your NCD (of 30%) which can be transferred to the new car.

However, if you are purchasing a new car, and keeping the existing one, then the new car’s NCD would start with 0% as you are not able to apply the same NCD on both car. We do advise that if you have more than one car, you should transfer the higher NCD to the more expensive (higher market value) car to gain more savings on premium.

Changing of Insurer

In the event you decide to renew your motor insurance policy with a new insurer, your NCD should apply to the new policy provided by this new insurer. NCD is something that is regulated and not set by the insurance company and therefore, it is applicable no matter which insurance company you purchase your motor insurance policy from.

Windscreen Cover

Windscreen policy is an add-on cover to your motor policy. Many people opt to purchase this considering how expensive it is to have a windscreen replaced. If you have windscreen insurance, then the insurance company will pay for any repair or replacement without you losing your NCD. However, if you do not have windscreen insurance and you claim, then you will lose your NCD. Here it makes sense to check what is better for you. A qualified insurance agent can help you with that decision. We will explain further with examples below.



How to take advantage of NCD?

Sometimes it is worth paying for the repair cost instead of making a claim against your policy. Doing so will help you retain your NCD. This applies when the repair cost is small and when the savings on your premium cost from your NCD is greater than the repair cost itself. Therefore, it is good to be aware of how much premium you are paying. As well as how much savings in terms of NCD you are getting to allow you to make a better decision. Here are some examples:

If you do not have windscreen cover / insurance:

Example: The repair cost for your windscreen is RM 500. You have 55% NCD that saves you RM600.

Solution: You should not claim against your insurance company, but pay the windscreen repair yourself. When you renew your insurance, you will have saved RM 100. But that isn’t all. You get further savings the following year (if there had not been any claim) since your NCD is retained.

But what if the repair cost is the same as the savings from NCD for that year? We would still suggest that you pay for the repair yourself. Since the savings you will get from NCD is more valuable.

If you have windscreen cover / insurance:

No effect on your NCD. So just inform your insurer and go ahead and repair your windscreen!

Be a smart consumer. Understand your policies well. This can protect your rights as a policy holder, as well as save you money and unnecessary cost. Always have your insurer’s care line stored in your phone. Make use of this service in case you have any doubt or inquiry regarding your policy. Insurance can be complicated and good advice is hard to come by. Should you need to find a trusted agent, our insurance agent directory can help locate one near you.


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