How a No Claim Bonus Works
What is a no claim bonus?
The car insurance industry in South Africa is rife with providers. To entice people to buy their policies, several insurers advertise a no claim bonus. Essentially, if you don’t make a claim for a given period of time, the insurer offers you a reward. The reward could be in the form of reduced premiums or a part of their premiums given back in cash.
Lengths policyholders go to for the no claim bonus
In order to qualify for the tempting cash back or reduced premiums, a number of policyholders opt not to make claims, even when they need to. Instead of claiming from their comprehensive cover, motorists involved in minor accidents opt to do the repairs on their own. Worse still, others choose to drive around 
with damaged cars.
In the case of damage caused by other drivers, instead of engaging their insurer, some quietly approach the other party. Sometimes they do this without even involving the other party’s insurer.
Risks of not claiming
When you desist from making a claim as an insured party, you are basically refusing to get value for service you have paid for. But in addition to this, the following risks will arise as a result of this practice:
- Road risk: Driving around in an unrepaired vehicle may expose other road users to avoidable dangers. Something as small as a malfunctioning indicator could be the difference between an uneventful drive and a collision with another car or pedestrian.
- Contractual risk: When you go and negotiate a settlement with another party who may have caused an accident with you, you are doing so at your own risk. One of the obligations the insurer takes on when you get into a contract with them is to protect your rights when such incidents occur. Approaching the other party without involving your insurer means they do not have to negotiate on your behalf. You then take on a complex process which you’re not equipped to complete.
- Industry-wide risk: The reputation of motor insurers and the insurance industry as a whole stands to suffer when a policyholder chooses to circumvent due process. When you go and talk to the other party’s insurer, you force their staff to deal with someone who is not their client. This is outside their standard procedure and may ignite conflict between insurers and policyholders. The risk of bad publicity, fueled by the quick spread of information on social media, is very real.
What should I do about my no-claims bonus?
If you are involved in an accident, exercise the provisions of your policy and make a claim. You as the policyholder will suffer most as you will spend more time and experience frustration. It is wise not to take a policy because of the no-claims bonus. In fact, where possible, ask for the bonus to be removed and factored into your premiums from the off.
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All info was correct at time of publishing January 19, 2018
