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The Guidance to NCB/NCD Calculation in Car Insurance

What is NCD/NCB? 

NCD/NCB (No Claim Discount / Bonus) is a type of discount or reward given to car insurance policyholder who has not claimed any compensation due to accidents in the previous year. For example, if the driver has no accidents or claims during the entire year of the insurance period, in this case, the insurance company will rebate the policyholder with a certain NCB discount if the policyholder renews the car insurance.

No Claim Discount Calculation

So how does the insurance company calculate the no-claim discount rate when renewing the insurance? In Hong Kong, no-claim discounts are usually calculated using a progressive ratio. Although the discount rate of each insurance company is different, the upper limit is 60%. The following example lists the number of years without claim for a private car and the corresponding discount rate for no claim:

  • No-Claims Discount in year 1 renewal:20% NCD

  • No-Claims Discount in year 2 renewal:30% NCD

  • No-Claims Discount in year 3 renewal:40% NCD

  • No-Claims Discount in year 4 renewal:50% NCD

  • No-Claims Discount in year 5 renewal:60% NCD


However, the NCD/NCB rate for vehicles' business use (Commerical Vehicle) is different from the above calculation for private car insurance, so you need to check with individual insurance companies.

In this article, we have sorted out some common questions about No-Claims Discount for your reference:

1. Can No-Claim Discount be transferred?

If the policyholder wants to change the insurance company, he/she only needs to purchase a new insurance policy within 12 months after the expiry or cancellation of the previous insurance. You have to provide valid supporting documents and the NCD/NCB may be able to be transferred, otherwise, it will be reset to 0%. However, as each insurance company has its No-Claim Discount policy, the calculation of NCD will be different. (If the policyholder sells his private car and wants to switch to a motorcycle, the NCD will be set to 0% and it will need to be re-accumulated.

2. For an accident claim, will NCD/NCB be revoked?

Most insurance companies have a "step back" system for NCD, so the NCD will not be revoked after a single claim. However, it should be noted that this "step back" mechanism is only applicable to private car drivers and only applied to those having 50% or 60%NCD. There will be no NCD entitlement for other types of vehicles the following year, if claims incurred. 

3. When a traffic accident occurred, is it necessary to notify the insurance company?

When a traffic accident occurred, the car owner must notify the insurance company within 24 hours after the traffic accident. Still, the car owner can decide whether to claim compensation for the accident. Some car owners may compare the NCD/NCB with the repair cost and choose the better option. For example, if the accumulated NCD/NCB is very high, and the car was only slightly damaged in the accident and the repair cost is lower. The owner can choose not to file a claim with the insurance company. However, this approach is risky, as it is difficult to estimate whether the other party will suddenly request huge compensation. Therefore, car owners need to consider and balance the risks.

AIG Auto Insurance provides third-party vehicle insurance and comprehensive insurance plans, covering various aspects to protect you and your vehicles fully. Car owners can choose the most suitable car insurance plan according to their needs. In addition to providing no-claim discount protection, AIG Auto Insurance also offers a variety of protections, including:

- “New for Old Cover” for a brand new registered car (within 1 year of vehicle age)
- Loss of Car Keys
- 24-hour Emergency Roadside Rescue
- NIL depreciation on spare parts (within 3 years of vehicle age)

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