What is a no-claim bonus?

Car Insurance is as such a pricey affair. Month after month, you diligently pay your insurance premiums. Being the cautious driver that you are, let’s say you never get involved in any unprecedented events on the road and subsequently make no-claims. Does this fact go un-noticed by your insurer? Not quite. In fact, they reward you the next time you renew your policy with what is known as a ‘no-claim bonus’. Well, the term ‘bonus’ might be misleading, so to clarify, it is actually a discount on your future premiums. Interesting. Isn’t it?

However, until recent times, not all insurers adjusted premiums based on the no-claim factor. This anomaly was duly noted by the Insurance Authority of UAE and the Board of Directors issued an order mandating all insurers to provide no-claim bonus. Subsequently, drivers with a clean record for one year would receive a 10% reduction in premiums. Furthermore, drivers with a 2-year incident free period can avail up to 15% discounts and ones with 3-years, can receive a whopping 20% discount. So, it definitely pays to be a safe and cautious driver in UAE.

Previously, insurers had also been charging customers a nominal administration fee to purchase the no-claim certificate. This has also been done away with and insurers must provide the certificate free-of-cost. In fact, customers are encouraged to lodge a complaint through the UAE Insurance Authority’s website in case their insurers are not complying to these regulations.

So, what if you indeed made a claim or two in the past insurance period. Does it mean your no-claim bonus drops to zero? Not necessarily. Insurers sometimes use a step-back scale to reduce the discount rate for the renewed premiums. You can also protect your no-claims discount by purchasing an add-on. Through this, you will be eligible to make claims (up to a pre-specified amount) in the insurance period and still be eligible for a no-claim bonus the following insurance plan-year. Some insurers even offer you the benefit of transferring your no claim bonus to another insurer or car, subjected to applicable conditions. It is to be noted that the no claim bonus is associated with the driver and not the car.

The concept of a no-claim bonus creates a win-win situation for both the insurer and the insurance holder. On one hand, Insurers like to do business with customers who make minimal or no claims, as the chances of the company making a lump sum pay out in the event of an accident is reduced. While on the other hand, customers get rewarded with good discounts for maintaining a clean record.

There is no set formula to calculate the discount that you are eligible for. There are various factors other than a claim-free period, such as age, profession and customer record (among others) that determine how much discount you might get. Every Insurer has different terms and conditions and you have to be wary about them before you sign the dotted line. Lastly, if you would like to get a no-claim bonus, you have to maintain a clean slate in the first place, so drive safely and happy motoring!