Steer towards an insurance bonus

For every year of no claim, the car owner gets discount on next year’s premium till it reaches 50 per cent of the first premium.

If you thought a good conduct certificate was earned only in school, think again! As a vehicle owner, you are rewarded for good conduct too. Ever heard of the no claim bonus (NCB)? As the name suggests, an NCB is an incentive to vehicle owners in the form of discounted premiums upon renewal of the insurance. So, if you have not made any claims for a whole year, your premium while renewing your vehicle insurance for the subsequent year reduces.

“Not very many agents are trained and therefore the customer is unaware of the NCB,” informed N K Kedia, director, marketing, IFFCO-Tokio General Insurance. Besides, the agent receives a cut from the premium.

UNIFORM DISCOUNTS
The discount rates are uniform across all companies. At the end of the first year, your NCB is 20 per cent. With every subsequent year (of no claims), your NCB increases to 25 per cent, 35 per cent and 45 per cent at the end of the second, third and the fourth year of renewal respectively. The NCB can reach a maximum of 50 per cent (at the end of the fifth year). Of course, if you break the chain once, then your NCB automatically goes back to nil.

An NCB can be transferred only from one insurer to another but not between owners when your vehicle is sold. Explained Ajay Shah, vice president, customer service, motors, ICICI Lombard General Insurance: “If you sell your car, you retain the NCB.” You can, of course, sell the insurance to the new owner.

An NCB is forfeited only in two cases: If there is any claim made during the year or if there is a break in the insurance period of more than 90 days beyond the expiry date of the previous policy. Many a time, a minor accident/incident is not claimed by the owner, as he may have a high NCB.

Rima Nanda, a car owner for 10 years, said, “Previously, my insurance company used to dispatch a letter before the time of renewal, informing us about our NCB. That has stopped now.” Intense competition among motor insurance providers has led to competitive pricing of premiums. This, Kedia said, has caused customers to shift from one insurance provider to another.

So, make note of these if you are a vehicle owner:

• NCBs can be retained post vehicle sale. Say, you are selling your vehicle and have no immediate plans of purchasing a new one. You have the option of retaining your NCB for a maximum of three years. All you need is a letter from the insurance company stating so.
• You can transfer the NCB at the time of renewal. An NCB you have accumulated while with your earlier insurer is taken into account while taking the new insurance. You must provide evidence from your old insurer. This could be a renewal notice, a letter confirming the NCB entitlement or a written declaration.
• NCB can be transferred without change in ownership. If you purchase a new car without selling your old car, you can transfer the NCB to the new car. However, you are to return the bonus for the unexpired period of the insurance.
• You can transfer an NCB in the middle of the term. If you shift to another insurer in the middle of the term, you can retain the same percentage of NCB in the new policy, subject to cancellation of the old policy.

According to some insurers, the three-year retention period is directly related to the skill of the driver. A big disadvantage is that you can only shift an NCB to your new vehicle if you are buying in the same category (two-wheeler to two-wheeler or a four-wheeler to four-wheeler). If you upgrade to a four-wheeler from a two-wheeler, the NCB is not valid. “You are being rewarded for being a good two-wheeler driver. The presumption is that when you migrate to a four-wheeler, you are, comparatively, a novice,” informed Shah.

Probably a good time for insurers to have a re-look at the fallacious argument.