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Use your history of no-claim bonuses to seek bigger discounts when renewing car insurance Image Credit: iStock

Dubai: Car insurance is an expensive affair when you diligently pay your insurance premiums month after month. Moreover the benefit of an insurance can only be made use of at the time of an accident.

Also, there is no restriction on the number of claims allowed under your policy, so you can file as many claims as you want. However, let’s say you never get involved in any road mishaps during the year – as is the case for numerous residents - and subsequently make no claims. This doesn’t go un-noticed by your insurer.

No-claims bonus is the discount given by your insurance provider for every claim-free year. You can avail this discount while renewing your policy and if you switch from your current insurer to another, you get a no-claim discount certificate from the last insurer.

It is the most reliable way of saving on your insurance premium. Let’s find out first how it helps you save and how you can maintain it over the years.

FAQ #1: How does no-claim bonuses help me save?

No claim bonus adds up every year, and the higher the number of claim-free years, the higher is the discount.

Did you know that you could save up to 20 per cent on your car insurance premium with a no-claim discount? As per the UAE Insurance Authority, an insured that has not made any claim for 1 to 3 years is allowed for a discount between 10 per cent and 20 per cent while renewing their car insurance in Dubai.

Additionally, if you have an excellent driving record, then some car insurance companies in UAE may provide you up to 50 per cent no-claim discount, considering your age, profession, and travel or driving history, among other factors.

Did you know? Not all insurers offered this until norms came into place
Until a couple of years ago, not all insurers adjusted premiums based on the no-claim factor. This prompted the UAE Insurance Authority to issue an order mandating all insurers to provide no-claim bonus.

Subsequently, drivers with a clean record for one year would receive a 10 per cent reduction in premiums. Furthermore, drivers with a 2-year incident free period can avail up to 15 per cent discounts and ones with 3 years, can receive a whopping 20 per cent discount. So, it definitely pays to be a safe and cautious driver in the 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.

FAQ #2: Won’t my no-claim discount be nullified if a claim is made last year?

Most people think that no-claim discount will be nullified if a claim is made in the previous year. However, car insurance companies reduce the percentage of no claim discount during policy renewal.

It varies from one insurance provider to another, as there is no set formula to calculate this reduction in the premium.

Your no-claim bonus is maintained even after making a claim for an accident or any other unforeseen event. Therefore, it is advisable that you check this with your auto insurance provider.

FAQ #3: Can I transfer my no claims discount?

No claims discount is associated with the driver and not the vehicle. It means that the discount can be transferred if you choose to switch your insurance provider or your car.

For this purpose, insurance companies provide the 'No Claims Certificate' free of charge, in accordance with the UAE Insurance Authority regulations that came into force earlier in 2018.

Stock Insurance claim
Insurance claim Image Credit: Shutterstock

FAQ #4: How do I opt for a no-claims bonus?

Some motor insurance companies in the UAE offer no claims discount protection. It is an optional cover that you can add on to your existing car insurance policy.

You are required to pay an additional premium to protect your no claims bonus after making a claim in the preceding year. This varies from one insurance provider to another and is subject to policy terms and conditions.

Some car insurance companies in Dubai will let you keep your no-claim bonus even if you make several claims (up to a specific limit) in a year, whereas the others will restrict the number of at-fault claims.

However, it does not imply that your car insurance premium will not increase the next year since the claim will be shown in your history.

FAQ #5: What if I made a claim or two in the past insurance period?

If you 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.

You will be then 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.

Verdict: No-claim bonuses provide a win-win situation for insurer and insurance holder

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.

Additional point worth noting is that an existing no claims discount can be applied to your second car as well, if the main driver remains the same.

COVID-19 and its impact on car insurance premiums
With the pandemic, particularly by late last year, motor insurance premiums were dropping for all models, bringing relief for car owners in the UAE but likely dented prospects of insurers. In actual terms, the decline in premiums represents savings of between Dh300-Dh500 for vehicles costing Dh30,000-Dh40,000, and from Dh800 and over for models priced in the Dh50,000 and over range.

About three years earlier the UAE insurance regulator recommended minimum premium for comprehensive motor insurance policies. For the better part of 2019, nearly all insurers had followed these recommendations – but that’s not been the case with the onset of the pandemic.

Currently there’s little appetite among the majority of car owners to pay what are high premiums. They are taking their business to another insurer who is willing to quote much less. While this offers more control on the part of the vehicle owner, insurers find that going low will not help their numbers, even with lower claims.