If you have been renewing your car insurance without making any claims, you may already be enjoying a lower premium through the No-Claim Discount, or NCD. This system rewards policyholders who do not file claims by reducing their insurance cost each year, up to a maximum of 55% after five claim-free years.

The discount is set by Persatuan Insurans Am Malaysia (PIAM) and is based on your claims history, not your driving record. You could drive carefully but still lose NCD if you file claims for scratches or dents. You could also have minor accidents but pay for repairs yourself without claiming, and your NCD continues to grow.

The NCD Scale In Malaysia

Malaysia uses a standardised NCD percentage scale set by Bank Negara Malaysia that applies across all insurance companies:

• Year 1 (no claims): 25% discount
• Year 2 (no claims): 30% discount
• Year 3 (no claims): 38.33% discount
• Year 4 (no claims): 45% discount
• Year 5+ (no claims): 55% discount

The maximum NCD you can earn is 55%, which takes five consecutive claim-free years to reach. Once you’re at 55%, staying claim-free maintains that level.

Say your base premium is RM2,000 annually. A 55% NCD brings it down to RM900 before other factors like excess or add-ons. That’s RM1,100 saved every year from a clean claims record.

What Happens When You Make A Claim

When you make an at-fault claim, your NCD resets to 0%, regardless of what level you had before. This applies whether you were at 55% NCD or 25% NCD. After a claim, you start rebuilding from zero, which takes five consecutive claim-free years to reach the maximum 55% NCD again.

Say your premium at 55% NCD was RM900. After making a claim, next year’s renewal at 0% NCD jumps to RM2,000 (your full base premium). That’s a RM1,100 increase in your annual premium, and rebuilding to 55% requires five years of claim-free driving.

For a minor accident causing RM1,200 in damage when you’re at maximum NCD, claiming through insurance could cost you the repair plus RM1,100 or more on next year’s premium. Higher premiums continue for several years as you gradually rebuild your NCD. Because of this, many drivers choose to pay for small repairs out of pocket to preserve their discount and keep long-term insurance costs lower.

Transferring NCD Between Vehicles And Insurers

Your NCD belongs to you as the policyholder, not to your car, so it can be transferred between vehicles and insurers.

When you buy a new car, your NCD moves with you. If you had 55% NCD on your old Myvi, you’ll have 55% NCD on a new Civic. The discount can only transfer between the same type of vehicle, such as car to car or motorcycle to motorcycle, and does not cross categories. 

Switching insurers doesn’t affect your discount either, as companies verify your NCD through their systems. This ensures your claim-free history continues to benefit you, even if you switch providers.

If you sell your car and don’t buy another immediately, your NCD remains valid for up to three years. After that, it expires, and you start from zero when insuring a new vehicle.

For policyholders with multiple cars, the NCD applies to only one vehicle at a time. You could have 55% on one car and 0% on another.

When NCD Doesn’t Apply

Certain situations don’t affect your NCD even though they involve your insurance.

If someone hits you and their insurance pays for your repairs through a third-party claim, your NCD stays intact. You can also make an Own Damage Knock-for-Knock (ODKFK) claim with your own insurer if the other party is clearly at fault and this is verified by a police report. This allows you to repair your car using your own insurance without losing your NCD.

However, ODKFK does not apply if the accident involves buses, taxis, Grab cars, school buses, or if there’s bodily injury. In these cases, you must claim from the at-fault party’s insurer.

Some policies allow claims for specific events like flood, fire, theft, or windscreen damage without NCD impact, but this varies by insurer and isn’t standard across the industry. Check your specific policy document, as what’s considered an NCD-neutral claim at one insurer might reduce your discount at another.

When To Claim and When To Pay Yourself

Deciding whether to claim or pay yourself depends on your NCD level and the damage cost.

For minor damage under RM1,500, if you’re at 45% to 55% NCD, the multi-year premium increase from claiming often exceeds the repair cost. Paying out of pocket protects your discount unless the damage is genuinely beyond your budget.

For moderate damage between RM1,500 and RM5,000, calculate your excess first (what you’ll pay even if you claim), then estimate the premium increase over two to three years. Sometimes claiming makes sense, sometimes it doesn’t. The calculation depends on your NCD level, your excess amount, and your car’s specific repair costs.

For major damage above RM5,000, claim. The repair cost exceeds what you’d pay in increased premiums over time, especially if the damage involves structural issues or safety systems.

If another driver caused the accident and you have their details, pursue a third-party claim through their insurance instead of your own. Your NCD stays protected and you don’t pay excess.

How Policy Structure Affects Your NCD

If you add named drivers to your policy and they are involved in an accident that results in a claim, your NCD will reset to 0% even if you were not driving at the time.

For company-registered vehicles, the discount belongs to the company rather than the individual employee. If you leave the company or later purchase a personal vehicle, you will need to build your NCD from zero.

Similarly, transferring ownership of a car to a spouse or child does not transfer the discount. Each driver must accumulate their own NCD, while you retain yours for use on a future vehicle under your name.

Why Your NCD Is Important 

At maximum 55% NCD, you’re saving over half your base premium every year for as long as you drive claim-free. Five years of claim-free driving earns you 55% off your premiums for potentially decades afterward.

You can check your current NCD status through the MyCarInfo portal using your vehicle registration number and IC number, or by contacting your insurance provider directly.

One claim for minor damage can cost you thousands in increased premiums over the next few years. The decision to claim or pay yourself depends on the damage cost, your current NCD level, and how long it would take to rebuild your discount.

If you need to compare car insurance options, you can explore policies and calculate your potential savings on our car insurance comparison page.

Want more practical money tips? Join our WhatsApp Channel for regular updates.