Not every car accident needs to result in an insurance claim. Here’s how a private car accident settlement works in Singapore, and what you need to know before pursuing or accepting one.
Car accidents are a fact of life, especially given Singapore’s congested roads and the increasingly reckless driving habits on display.
While getting into a fender bender is more a matter of when, not if, a road accident need not always entail making an insurance claim and risking a spike in your motor insurance premiums at the next renewal.
Drivers in Singapore are allowed to enter into private settlements for car accidents, but this is only allowed (or advisable) in specific scenarios.
In this article, we will be taking a look at how a private car accident settlement works, and why you may want to opt for this path instead.
What is a car accident private settlement?
You may be thinking, “Wait, I can settle a car accident privately, without getting my insurer involved?” And, of course, the answer is yes.
When you get into a minor traffic accident, you can offer to enter into a private settlement with the other party. What this means is that all parties agree to a resolution to the accident without making claims against the other’s insurer.
However, both (or all) parties who have a right to claim damages have to agree to settling things privately before you can proceed. It’s not a matter of just telling the other party to call you, and that’s that. And be alert to "insurance specialists" who suddenly appear near the accident site and may not have your best interests. Engage only with the driver and your insurer.
Don’t mistake a private settlement as something you can take lightly; private car accident settlements are considered as binding and legal contracts that carry legal consequences – more on that later.
Why a car accident private settlement may be preferable
One word (or rather, three): No-claims Discount (NCD).
As you’re probably aware, your NCD can help you save hundreds of dollars a year on your motor insurance premiums, but it takes a painfully long time to grind up to the maximum discount.
You’ll only get 10% NCD per year of claims-free driving, which means you’ll need to have a spotless record for five full years before hitting peak 50% NDC.
But yet, having just one single at-fault accident will knock your NCD from 50% down to 20%, erasing three years of hard work at one go.
And, if you should suffer another accident soon after, your NCD gets reset to 0%, and it’s back to paying full premiums for at least another year.
Understandably, rivers wish to protect their hardwon NCD by purchasing an optional NCD protector, which gives you one free pass for an at-fault accident claim per year. But, this involves spending yet more money.
However, if an accident is settled privately, your NCD will not be affected! This is because the NCD penalty is only applied when an at-fault accident claim is made against your motor insurance policy.
As such, choosing a private settlement in a car accident can actually save you from having to eat inflated driving expenses down the road.
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When should you enter into a car accident private settlement?
Ok, so a private settlement can be advantageous, but does that mean that you should try to settle any and all traffic accidents privately?
Well, no – there are certain scenarios in which a private settlement cannot be used as a means of resolution, but we’ll go over that in more detail in the next section.
As a general rule, you should only consider a private settlement if the damage to your vehicle is minor, and the cost of repairs is unlikely to exceed the excess on your motor insurance plan.
This is especially relevant if you’ve opted to pay a higher excess in exchange for lower premiums.
(Note: Insurance excess is borne by the policyholder, unless a waiver is purchased. In some cases, an insurer may offer an excess waiver as a loyalty bonus for renewing your policy.)
When can you not enter into a private settlement?
A private settlement cannot be entered into if the car accident resulted in:
- Death or bodily harm to any person, including a non-driving party (such as a pedestrian)
- Significant damage to any property, especially if government property or public utilities was damaged
- Hit-and-run incidents
Under these circumstances, the standard route of accident reporting is your only option. This includes contacting the police and/or emergency services for assistance, as well as calling your insurer’s accident hotline.
Should you still inform your insurer about the accident even though you’ve decided to settle privately?
Don’t be mistaken that just because you and the other party have agreed to settle the accident privately, there is no need to report the accident to your own motor insurer. That is false.
You are still required to inform your insurer about the accident (but you do not have to submit any claims), and you’ll need to do so within 24 hours.
Do not take this lightly. Failing to notify your insurer about the accident can have some pretty severe consequences. If your insurer finds out, they may:
- Reject a future insurance claim should the claim exceed the amount agreed upon in the private settlement
- Dock your NCD when your policy is up for renewal
- Decline to renew your motor insurance policy altogether
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What should you do if you enter into a private settlement for a car accident?
Here’s a step-by-step guide for entering into a car accident private settlement.
- Bring your vehicle down to an authorised workshop for a written estimate of the repair charges. This is the most important step in the process, and will form the basis upon which fair compensation may be decided.
You should only go to a workshop approved by your insurer, in case the actual cost of repairs exceeds the agreed compensation, sticking you with paying the remainder.
- Next, complete and sign a private settlement form or letter. You may use a template provided by your motor insurer, or consult a legal firm in preparing one.
In particular, a private settlement letter should include:
- Details of the accident (location, date and time)
- Particulars of parties involved and their vehicles (full names, identification numbers, vehicle registration numbers)
- Terms of the agreement, which may include the following statements:
- That no personal injury or death was involved in the accident
- That all parties agree to settle the matter amicably
- Of the amount to be paid by one party to the other
- That both parties will not make a police report of the accident;
- That neither party will subsequently file a claim for damages based on the accident
- Acknowledgement of receipt of compensation, if any
- Signatures of parties entering into the settlement
What happens if the terms of the settlement are breached?
If all parties manage to settle the accident amicably and satisfactorily, you may consider the matter closed and go on your merry way.
However, if the other party changes their mind and violates the terms of the settlement – such as by not paying the agreed compensation, whether partially or in full, or by lodging a separate claim for damages outside of the private settlement – there is grounds for legal action to be brought.
Such an event is subject to remedies under the law for breach of contract, including seeking compensation or damages.
Resolving the breach may involve court proceedings for arbitration. Claims under S$20,000 may be directed to the Small Claims Tribunal for resolution.
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