Thursday, April 1, 2010

Why must motor insurers be allowed to have it both ways

Do you know you can insure against the loss of your No-Claim Bonus (NCB) in your motor insurance policy in the event of an accident? Many people do not and are quite excited when they are told about it.

But do not for one moment think that having this protection in your policy means that your premium will stay intact or, at most, increase by a minimal amount, particularly after you have been involved in an accident that may not be totally your fault.

When you are in such a situation, may God help you, because your fate is really in the hands of your insurance company and there is very little you can do about it.

I was in that kind of a dilemma in February this year when my wife's car insurance came up for renewal. The insurer, Royal and Sun Alliance (yes, it is same company), jacked up the premium by more than 200 per cent, justifying it by saying that it had paid out more than $9,000 for "own damage" and had reserved another $9000-plus for third party damage.

I was puzzled by the logic of the increase, so I made an appeal to RSA on two grounds. My email said:

"Firstly, my wife's insurance policy had a no-claim bonus protection. However, with the proposed huge increase in premium, RSA has in fact made a mockery of this protection. What's the point of paying for this protection when the company can wily nily do whatever it wants in terms of premium?

"Secondly, RSA has slapped on the extra premium without giving due consideration to the circumstances of her accident. She was not at fault. The least RSA could have done for its client was to first establish which party was liable instead of assuming that she was to blame and be made to pay the penalty."

The appeal succeeded in bringing down the premium by a few hundred dollars but it was still an increase of more than 100%. There was also a condition attached in the new proposal -- my wife could not switch insurance cover to another company since she had already made a claim. But if she did, her NCB would be reduced to just 20%.

That seems like a cartel at work. I wonder what the Competition Commission of Singapore would say if they knew about it. I will certainly ask them.

As the renewal deadline drew nearer, my wife had no choice but to agree to the new proposal. To help reduce the premium amount further, I advised her to drop her coverage for young drivers and usage of own workshop in the event of an accident.

Moral of the story? The NCB protection coverage will not stop your premiums from skyrocketing because the insurers now have it both ways -- they collect premiums for NCB protection and if you are unfortunate to meet with an accident, they just push up your premiums sky-high without a care about your NCB protection. Sigh!

BOO-QUET for the motor insurance industry!!!


  1. Hi,
    Accident this Feb 2010 again?? Was your wife driving the same car as you did for that last accident in year 2008? {your blog on How an insurers created a mess} If the same, the same car having 2 accidents within 2 years. Your wife's car repair costs at $9000 and another third party claim reserve at $9000. A total of $18,000. Not a small sum tho. I suppose its only right to impose claims loading. I understand NCD protection is to protect your NCD if you have only 1 claim within 1 period of insurance. NCD will only be penalised if you have 2 or more claim within 1 period of insurance. Buying the NCD Protection is only allowed if you have 50% NCD. This protection is not for protecting claim loading if you have claim(s)under the policy. I also understand the NCD protection is not transferable. Could this be the reason why your insurers is highlighting your wife of the consequences of having a reduction of NCD to 20%? I think this could be the reason.

  2. No, it was a different car and the accident happened last year. Anyway, the first accident in 2008 was not my fault as I have explained. My point is, insurers should not be accepting blame on behalf of their clients so easily. They can do so now because they know they can jack up the premiums without any consultation or proper investigation into who is at fault. NCB protection will not keep your premiums down once you are involved in an accident. And because NCB
    is not transferable, motorists are caught in a bind. Does that not seem like a cartel at work?