No Claim Discount relief add-on: A handy buffer in road mishaps

PETALING JAYA: Despite meticulous attention to traffic rules, advanced vehicle safety features and heightened awareness, drivers can still find themselves in the wrong place at the wrong time.

This can be seen in the 598,635 road crashes in 2023, which is almost 10% more compared to the previous year.

And with Hari Raya just a fortnight away, heavy traffic is expected on Malaysian roads as people return to their hometowns.

Vehicle owners could lose their No Claim Discount (NCD) in accidents, which adds on to their financial burden when they renew their vehicle insurance the following year.

Fortunately, there is an option for drivers, which is to buy the NCD relief add-on.

General Insurance Association of Malaysia chief executive officer Chua Kim Soon said that most drivers are not aware about the NCD relief add-on.

When an accident occurs in which it cannot be determined who is at fault, he said the driver would then have to make a claim to his own insurer, which ultimately affects his NCD.

“With this add-on, you will be compensated for the NCD once the claim is settled,” he said in an interview.

According to Chua, the add-on is generally cheaper than the cost of buying flood coverage, which is usually a small percentage of how much the car is insured for.

NCD relief add-on prices may vary depending on the actual NCD entitlement and the terms may differ from one insurer to another.

“The relief, however, can help cushion the financial impact when renewing insurance for the coming year,” he said, adding that the compensation will be awarded once the claim process is completed and is only valid for that renewal.

Under this add-on, drivers who lose their NCD will be compensated following the percentage of their accumulated NCD up to that point.

The NCD is a “reward” when no claim has been made during the period of insurance.

READ MORE: Accident victim regrets not buying NCD add-on

When a claim is filed due to your fault, your accumulated NCD entitlement will be reset to 0% at the next renewal.

Generally, the NCD for the first year is 25% followed by 30% in the second, 38.33% in the third, 45% in the fourth and 55% in the fifth year and beyond.

Referencing an NCD amounting to RM500, Chua said the policy holder will be compensated this amount under the NCD relief add-on.

“In the following year, your NCD will be at 0% but you have that RM500 as a relief for that renewal and you can build from there again,” Chua said.

He suggests the public look through the add-ons offered by insurance providers.

“It is good to have it but it not compulsory. It depends on each individual.

“If they are more risk averse and don’t want to be hard-pressed for cash, it can be helpful,” he said.

He noted that the NCD relief is also applicable to accidents with commercial vehicles.

“If you file a claim and there is this add-on, it will trigger,” he said.

To a question if one can submit another claim despite already making a claim earlier in the year of coverage, Chua said this is possible.

“The policy is valid for 12 months. The claim can be made as long as the vehicle is not a total loss,” he added.

On another matter, he said there are some instances where vehicle owners are unable to protect their NCD if they are involved in accidents.

This includes situations where the at-fault third party’s vehicle is a commercial passenger vehicle like buses, taxis and rental cars, except for private e-hailing vehicles.

However, in accidents between motorcycles and cars, with the former being the party at-fault, Chua said vehicle owners can make a claim under their own insurers without affecting their NCD.

This, he said, will be through the Own Damage Knock for Knock (OD-KFK) claim.

“Here, the police report and, more importantly, results of the investigations are crucial as it determines who is at fault.

“The insurer will usually ask for both the report and investigation findings.

“Here, the policy owner can file a claim under OD-KFK, with the insurer taking note while the vehicle is sent for repairs,” he added.