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As all car owners in Singapore would already know, car insurance in Singapore is mandatory, and renewable on an annual basis.
Like all other insurance policies, car insurance works based on a risk-pooling method. What this means is that the insurer pools together all the premiums collected from their policyholders, and pays it out to policyholders who claim for damages.
The lower the insurance payout, the more profitable an insurer would be. This means that safe drivers are also better customers to insurer for.
On the other hand, reckless drivers are bad customers to have. These drivers not only drive up (pun intended) insurance claims which reduces an insurer bottom line, but also increase premiums for everyone else in the risk pool, including safe drivers.
How No-Claim Discount (NCD) Works
In order to incentivise drivers to adopt safer driving habits, car insurers in Singapore offer a no-claim discount (NCD). For each year in which drivers do not claim on their insurance policy, they get a 10% NCD, up to a maximum of 50%.
For example, if a car insurance premium cost $2,000, drivers could potentially enjoy a discount of up to $1,000 (50%) if they have not claim from their insurance policies over the past five years.
But is this enough to reward safe car drivers, who despite never having made a claim, continue to pay higher premium because of the actions of other reckless drivers?
A new insuretech platform in Singapore, Vouch, doesn’t think the current system provides sufficient incentive to reward drivers who are doing their part in keeping the road safe.
Their solution? No-Claim Rebate.
How No-Claim Rebate Works?
Vouch provides a cashback of up to 15% of insurance premium if a driver does not make a claim during the year. For example, if your car insurance premium is $1,000 per year, you can enjoy a cashback of up to $150 if you buy your car insurance through Vouch.
If this sounds like a deal too-good-to-miss, we would say you are right, it’s really that good. But before you sign up for it, here are five things that you first need to know about how Vouch No-Claim Rebate (NCR) works.
# 1 Your Policy Continues To Be Insured By An Established Insurer
This is the first (and most important) thing that you ought to know.
Vouch is a platform that helps facilitate the purchase of your car insurance policy. The policy that you bought, through Vouch, is ultimately still from the insurer who offers the policy.
This means that all underwriting risk, criteria to be met and claim payouts remains as it is.
This is important to know in order to debunk the possible misconception that Vouch is taking on the underwriting risk, or is in charge of the claim process or payout. It’s not. All these tasks are still handled by the insurers themselves, similar to how it would be if you bought the policy from them directly, or through other third-party platforms or agents.
Also, all the usual benefits that you enjoy when you buy a policy with these companies such as the 24/7 accident response team and an extensive list of approved car workshops remain the same.
Currently, there are three insurers who have partnership with Vouch. They are Income, Sompo and Tokio Marine.
# 2 You Also Get Your NCD
Probably the biggest question that any interested car owners will ask.
Yes, you get both the NCD and the NCR.
For example, if your car insurance premium with Tokio Marine is $2,000 but you currently enjoy a 50% NCD because you have been accident-free for the past five years, your insurance premium would be $1,000 per year.
If you decide to renew your policy through Vouch, you will continue to pay the discounted rate (with NCD) of $1,000. In addition, you will also enjoy the NCR, which is up to $150 (15% of $1,000) if you remain accident-free.
# 3 Your NCR Depends On The Risk-Pooling Group That You Are In
How Vouch NCR works is best explained through an example.
Hypothetical Case Study
Assuming you and 19 other friends form a group of 20. Each of you pay an insurance premium of $2,000.
|Premium Per Individual
|NCR Per Individual
|Total Pool Of NCR
|$6,000 (for 20 pax)
This is what happens when someone in your group files a claim for $1,000.
1) His personal NCR gets deducted first. So that means he loses his entire NCR of $300.
2) The remaining $700 will be deducted proportionately from the remaining 19 people in the group. Since (in our case) they all pay the same premium, this will be divided equally ($36.84).
3) After the deduction, each individual will have a NCR of $263.16 left. Assuming no other claims were made for the year, they will each enjoy a NCR of $263.16. The only exception in this case would be the person who made the $1,000 claim.
If the Group’s NCR falls to $0, there will be no NCR for members within the group for the year.
# 4 Maximum NCR Deducted Per Claim Is $2,000
In order to avoid possible situations where a big single claim could wipe out the group’s entire NCR, there is a cap of $2,000 per claim which can be deducted from the NCR.
For example, if a person files a claim for $10,000 and the payout is approved by the insurer, only $2,000 will come from the Group’s NCR. The remaining $8,000 will be paid directly by the insurer.
This way, the group’s NCR will not be entirely wipeout just because of the big $10,000 claim.
# 5 Choose Between Public And Private Group
Vouch allows users to join two types of risk-pooling groups.
Public Group: This means your NCR is combined with other members NCR to form a (public) group rebate pool. This is the default choice.
Private Group: Supposed you and nine other family members or friends all know that you are safe drivers who are less likely to claim. Among yourself, you can form a private group. This will be a close group.
his makes a lot of sense if you have a big family and/or a big enough circle of friends and you know who are the safer drivers among your network of contacts.
Do note that you need a minimum of 10 drivers to form a private group.
Vouch Wants To Reward Safe Drivers
The underlying assumption behind Vouch business model is inherently linked to its mission. Insurers already know that safe drivers make for better customers and are willing to give discounts (through NCD) of up to 50% to these drivers.
While that is good, Vouch wants to reward these safe drivers even more.
By giving an additional 15% cashback on premiums, drivers now have the incentive to not only ensure that they drive safely, but also to get their family members and friends to do so, and to achieve greater cashback if they are collectively successful.
Through the platform, Vouch hopes to bring in more of such safe drivers to the insurers that it partners with.
While these insurers may earn a lower premium from the drivers as they are setting aside 15% of the premiums to be returned back to their customers, the tradeoff is that they will be able to get more safer drivers, which makes for better customers.
Are you a safe driver who is interested to renew your car insurance policy through Vouch? Or just want to find out more about how the No-Claim Rebate works? You can open an account to find out more today.
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