What is a Bonus-Malus System and How to Request Your NCD Proof?
When calculating the cost in a particular car insurance, a driver will necessarily encounter the term “bonus-malus” or “NCD”. If you have not dealt with this before, let’s find out what it means.
What is a bonus-malus?
Bonus-Malus System, BMS is a system of tariff coefficients, usually used in the insurance business, which changes the size of the insurance premium paid by the client (policyholder) to the insurer depending on its history of insured events.
There are other definitions of the bonus malus concept:
- Calculation of insurance premium rates taking into account individual driving experience;
- Rating system based on insurance experience of drivers;
- No claim discount – the system of discounts for no insurance claims;
- Rating system based on the past merits of drivers (policyholders).
In most developed countries, a car insurance system has a rating system that fines the policyholder responsible for one or more traffic accidents with an increase in the premium or a malus, and encourages policyholders who did not commit an insured event with a decrease in the premium or a bonus. The main goal of this system is to increase the interest of policyholders in more accurate driving, as well as to take into account individual risks as best as possible, so that each policyholder pays an insurance premium corresponding to his own frequency of insured events.
The bonus-malus system is part of the insurance rate system and is based on actuarial calculations.
What is a NCD?
No Claim Discount (NCD) is a remuneration in the form of a discount on insurance premiums provided to holders of insurance policies if they have not submitted applications for insurance compensation for a year or more. This system is mainly used in car insurance, where a 33% discount for one year without claims for reimbursement can increase up to 60% if there were no claims for four consecutive years. In all cases, compensation is provided for the absence of applications for insurance compensation and is not associated with liability for any accident. For example, compensation for the absence of claims for insurance compensation is lost if the car is stolen not through the fault of the insured.
How to request an NCD proof?
First of all, you’ll need to make get some documents from your previous insurer.
There are three main forms of NCD proof:
- The renewal invite from your current or previous insurer will announce the number of years you’ve had a no claims bonus;
- A cancellation letter from your previous insurer, as long as it reveals your no claim dicount;
- A letter from your previous insurer verifying your no claims discount.
Proof of no claims is usually only valid for two years.
Many insurance companies will allow you to upload these documents online through their websites, or you can email or sent them by letter. In some cases, your new insurer may need direct contact with your previous insurer to make sure your no claims bonus.
Tags: discounts, driving, insurance