Bonuses and malus create a system whereby insurance companies determine how much a given driver will pay for compulsory liability insurance. This system takes into account the driver’s history – whether they drive safely or are frequently involved in accidents. Drivers who drive without accidents get a discount (bonus) on their compulsory insurance. The opposite of a bonus is a malus. This means that drivers who cause accidents get notional negative points and are penalised by the system, so they pay extra on their compulsory insurance. The aim of this system is to distribute the cost of compulsory insurance fairly according to the riskiness of individual drivers.
The bonus and malus system in the Czech Republic is based on the Motor Third Party Liability Insurance Act. This law requires insurers to keep a record of the damage-free course of insurance and to take it into account when setting the amount of the premium. In other words, insurance companies must favour drivers who do not cause accidents. They are also obliged to allow the transfer of the bonus between insurance companies. If the insurance company does not recognize your bonus correctly, you may have a defense. One way is to file a complaint with the Czech Insurers’ Bureau, the other is to go directly to court.
How are bonuses calculated?
As we mentioned above, a bonus is a discount on compulsory liability insurance that a driver receives every 12 months without an accident. The amount of this bonus gradually increases with the years spent behind the wheel – usually in five per cent increments until the bonus reaches its maximum amount. The maximum possible discount varies from insurer to insurer, but is usually in the region of 50-60%.
Each insurer therefore has its own system for calculating bonuses, but in general:
- For every year without an accident, the driver is credited with a certain number of accident-free months.
- Once a certain number of months has been reached, the driver is entitled to a corresponding discount on the premium.
So, after the first year, if the driver pays his compulsory insurance and drives accident-free, he gets a discount of, for example, 5%. After five years he reaches a 25% discount and after ten years behind the wheel without accidents he gets a 50% discount on his compulsory insurance.
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The insurance company didn't do the right thing and you want to defend yourself?
In this case, please do not hesitate to contact us. We will be happy to go through all the necessary documentation for you and draw up the documents for the insurance company so that you can claim the correct bonus. In case of a dispute, we will represent you. Don’t let a miscalculated malus or bonus fool you. We will help you defend yourself.
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Can the bonus be transferred?
Bonuses are always linked to a specific policyholder, not to a vehicle. So if you buy a new car, you can of course transfer your bonus. It is also possible to transfer your bonus between insurers. So if you have your car insured with one company and you drive for eight years without an accident, you’ll get a discount of, say, 40%. But then you decide to change insurers and switch to another. That company has to accept your accident-free record and offer you a 40% bonus, even though you are just starting out.
What is the impact of malus?
A malus is the opposite of a bonus, so it means a surcharge that the insurance company adds to your accident premium. If you cause an accident, the insurance company will deduct the appropriate number of months of no-fault time. This can make your compulsory liability insurance more expensive again.
Each accident means deducting several months of injury-free time. For example:
- 1 accident = deduction of 24 months.
- 2 accidents = deduction of 48 months.
- 3 or more accidents = can mean the highest malus and a significant increase in premiums.
Thus, you may go six years without an accident and get a 30% discount. Only then you cause an accident. The insurance company deducts 24 months and your bonus drops to 10%. This will be reflected in the cost of your third party insurance for the next period.
What if the insurance company’s calculations are wrong?
It’s human to make mistakes and even with the bonus-malus system, sometimes the insurance company will get it wrong and miscalculate how they should benefit or penalise you.
Sometimes it happens that the insurance company doesn’t take into account your injury-free record correctly and doesn’t give you the right bonus. In this case, ask for a statement from the claims record. If the insurance company is really at fault, file a claim. If you are unsuccessful, you can contact the Czech National Bank as the market regulator. We will be happy to help you.
If, on the other hand, the insurance company wrongfully adds a malus for an accident that was not your fault, you can also defend yourself. Ask the insurance company for proof of the claims process. If it turns out to be an error, ask for the data to be corrected. If the insurance company is not cooperating with you, contact us and we will help you resolve the situation.
Example:
A client, let’s call him Mr. Kinsky, contacted us complaining that the insurance company gave him a malus for an accident. However, Mr Kinský was selling his car and the new owner had already caused the accident. So we lodged a complaint and it was found that the error was caused by an incorrect transcription of the data. Subsequently, the insurance company deducted Mr Kinský’s malus and set the price of the compulsory liability insurance according to the actual values.
Tip for article
Tip: Do you know the difference between accident insurance and compulsory liability insurance? Find out which protects you and which pays for damages if you hit someone.
How to use the bonus and malus system effectively?
First and foremost, you should take an active interest in your insurance history and keep track of what adjustments the insurance company makes to your compulsory liability policy. If you want to switch to a different insurer, then get a no claims certificate from your current one. If you cause an accident, consider whether malus insurance would be worthwhile. Some insurance companies offer this too. And if you are selling your car, then cancel your third party insurance as soon as possible so that any damage caused by the new owner is not passed on to you.
The bonus and malus system is a fair tool to encourage responsible driving in the first place. However, it leaves a lot of room for disputes with the insurance company. If you feel that the insurance company has incorrectly charged you a malus or denied you a bonus, remember that you have the right to defend yourself. If you want our help, just let us know.
Summary
The system of bonuses and malus in compulsory third party insurance plays a key role in determining the amount of the premium, while encouraging drivers to drive safely and penalising those who cause accidents. Bonuses represent a discount on premiums that increases with each accident-free year, while malus represent a surcharge for damages caused. The maximum amount of a bonus is usually between 50-60% for insurance companies, while malus can make premiums significantly more expensive and are deducted according to the number of accidents. The bonus is linked to the individual policyholder, not the vehicle, and can be transferred between insurers. If an insurer miscalculates the bonus or wrongly applies a malus, you can defend yourself – first by filing a claim with the insurer, then by filing a complaint with the Czech Insurers’ Bureau or the Czech National Bank. To use the system as efficiently as possible, keep track of your insurance history, get a no-fault certificate in time and cancel the compulsory liability insurance immediately if you sell your car to avoid incorrect entries. If you feel that your insurance company has incorrectly credited you with malus or denied you a bonus, don’t hesitate to fight back – either by filing a claim or with our help.
