Key takeaways
- Under Bank Negara Malaysia's claims settlement rules (in force for betterment since 1 July 2024), betterment can only be charged when new franchise parts are fitted on a car aged 5 years and above.
- The maximum betterment rates are 15% at 5 years, 20% at 6, 25% at 7, 30% at 8, 35% at 9 and 40% at 10 years and above; a car under 5 years pays 0% and must get new franchise parts.
- A car's age for betterment runs from the registration date for a new car, the original registration date for a local used car, and the manufacture date for an imported recond car.
- Before fitting franchise parts, the insurer must tell you in writing that new non-franchise or second-hand parts avoid betterment, and get your written choice.
- Betterment can still apply when you claim from the other driver's insurer: in a March 2025 FMOS case on a third party claim, betterment on nine-year-old parts was found in line with BNM guidelines.
- A betterment waiver add-on, called Franchise Workshop Betterment Extension at Great Eastern General, must be added to the policy before an accident to cover new original parts.
What is betterment in car insurance?
Betterment is the part of a repair bill that you pay, not your insurer, when an accident-damaged car aged 5 years or more is repaired with new franchise (original) parts. Bank Negara Malaysia (BNM) defines it in its Policy Document on Claims Settlement Practices as a charge that a consumer bears when new franchise parts are used to replace the damaged part on accident vehicles aged five years or more.
The reason is the principle of indemnity: car insurance puts you back where you were before the accident, not in a better position. When a seven-year-old bumper is replaced with a brand-new original one, the car comes out better than it was, so you share the cost. The Financial Markets Ombudsman Service (FMOS) explains its betterment decision with the same reasoning.
I often see betterment mixed up with the other deductions on a claim. They are different things, and one claim can have more than one of them:
| Deduction | When it applies | How to reduce it |
|---|---|---|
| Betterment | New franchise parts are fitted on a car aged 5 years and above | Choose new non-franchise or second-hand parts, or add a betterment waiver before any accident |
| Excess | The first part of an own damage loss stated in your policy schedule, whoever is at fault | Check the excess on your schedule at renewal |
| Compulsory excess RM400 | The car is driven by someone not named in the policy, or a named driver under 21 or on a P or L licence (Great Eastern General PDS, 26 August 2025) | Name every regular driver, or add Waiver of Compulsory Excess |
| Average clause | The car is under-insured; InsuranceInfo says insuring below 90% of market value counts as under-insured | Insure at the market value at every renewal |
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How much is betterment? The BNM scale by car age
BNM sets the maximum rates in Appendix III of the policy document, and the betterment paragraphs have applied since 1 July 2024 (BNM FAQ on the policy document). The same scale is printed in the PIAM consumer guide on motor insurance. An insurer may charge less, but not more.
| Age of your car | Maximum betterment rate | What the rule says |
|---|---|---|
| Less than 5 years | 0% | The insurer must use new franchise parts with no betterment charge (paragraph 11.16) |
| 5 years | 15% | Charged only when new franchise parts are used; never on non-franchise parts (paragraph 11.17) |
| 6 years | 20% | |
| 7 years | 25% | |
| 8 years | 30% | |
| 9 years | 35% | |
| 10 years and above | 40% |
How the age is counted matters more than most owners think. Appendix III sets the starting point:
| Type of car | Age counted from |
|---|---|
| New car | Date of registration |
| Local used car | Date of original registration, not the date you bought it |
| Imported used car (recond) | Date of manufacture |
Recond owners, take note. A recond car made in 2020 and registered here in 2023 is not a 3-year-old car for betterment. Its age runs from 2020, so it reaches the 15% band during 2025, years earlier than the registration date suggests. Check the manufacture year in your documents before you assume you are under 5 years.
Worked example: how much will I pay on a 7-year-old car?
Here is an example with made-up figures so you can see how the numbers work. Your own approval or offer letter will show the real figures.
Assumptions (example only): an own damage claim; the workshop needs a new front bumper and headlamp; the new franchise parts cost RM2,000 in total; labour and paint are paid under the claim as usual; any policy excess is left out; and the betterment rate is applied to the price of the new franchise parts.
| Example car | Age for betterment | Maximum rate | Betterment on RM2,000 of new franchise parts | With second-hand or non-franchise parts |
|---|---|---|---|---|
| Local car first registered March 2019, accident April 2026 | 7 years | 25% | RM500 | RM0 |
| Recond car made January 2020, registered here 2023, accident June 2026 | 6 years (from manufacture) | 20% | RM400 | RM0 |
| Local car first registered 2015, accident 2026 | 11 years | 40% | RM800 | RM0 |
| Local car first registered 2023, accident 2026 | Under 5 years | 0% | RM0, and new franchise parts must be used | Not applicable |
Two things stand out. First, the same repair costs a 10-year-old car more than twice what it costs a 5-year-old car in betterment (40% against 15%). Second, the recond car pays betterment even though it has only been on Malaysian roads for 3 years.
Do not rely on the example for your own claim. BNM requires the insurer's approval or offer letter to list itemised repair estimates, including parts prices and labour charges, and to state how the betterment scale was applied (paragraph 10.22). That letter is the document to check line by line.
How do I avoid paying betterment? Your choices before the repair
BNM's rules give you a real choice, and the insurer has to put it in writing. These are the steps I suggest, in order:
- Confirm the car's age on the basis in the table above: registration date, original registration date, or manufacture date for a recond.
- Wait for the written option. When betterment applies, the insurer must advise you in writing that new non-franchise parts or second-hand parts avoid betterment, and must get your explicit written confirmation of the parts you chose and the betterment you agree to pay (paragraph 11.18). Do not sign until you understand the ringgit amount.
- Choose the parts. No betterment can be charged on non-franchise parts for a car aged 5 years and above (paragraph 11.17). BNM's motor insurance FAQ gives second-hand parts as the example.
- Read the approval or offer letter. It must list itemised repair estimates based on the Motordata Research Consortium (MRC) database or a similar credible database, and show how betterment was applied.
- Query anything outside the rules. A rate above the scale, betterment on non-franchise parts or on a car under 5 years, or a charge you never agreed to in writing: raise it with the insurer's complaints unit first, then FMOS, which is free for consumers. My guide to FMOS complaints has the steps.
| Parts option | Betterment? | What I would ask the workshop |
|---|---|---|
| New franchise (original) parts | Yes, up to the scale, for cars 5 years and above | The total betterment in ringgit before you sign |
| New non-franchise parts | No (paragraph 11.17) | How the part fits and whether the workshop gives its own warranty on it |
| Second-hand parts | No (paragraph 11.17) | Whether a part in good condition is available, and how long the wait is |
For parts that affect safety or visibility, such as lights, I would ask the workshop directly whether a non-franchise or used part is suitable, and decide on that answer rather than price alone.
Does betterment apply if the other driver is at fault?
It can. Betterment depends on the parts and the car's age, not on who caused the accident. In a case study FMOS published in March 2025, a driver claimed loss of use and betterment charges from the other driver's insurer, a third party property damage (TPPD) claim. New franchise parts had been used to repair her car, replacing parts that dated from 2013, nine years before the accident. FMOS noted that betterment charges were applied in line with BNM's guidelines for vehicles aged five years and above, and the case was decided in the insurer's favour. That claim also failed for a separate reason: the other driver had no valid licence.
If you are not at fault and have comprehensive cover, you can also claim from your own insurer under Own Damage Knock-for-Knock (OD KfK) without your NCD being affected. The Star (30 August 2025) reported BNM saying this option does not apply when a bus or taxi is involved or anyone is injured. Under BNM's policy, your insurer settles your excess and CART (compensation for assessed repair time) on an OD KfK claim (paragraph 14.14). Betterment is not on that list, so ask before you choose parts.
| Claim route | When you use it | Betterment |
|---|---|---|
| Own damage | You are at fault, or no other party is involved | Applies when new franchise parts go on a car 5 years and above |
| OD KfK | You are not at fault and have comprehensive cover | Not among the losses BNM lists for your insurer to settle; ask first |
| TPPD claim | You claim from the at-fault party's insurer | Can still be applied, as the FMOS case shows |
For the full claim process, deadlines and documents, see my car accident claim guide.
What is a waiver of betterment, and is it worth adding?
A waiver of betterment is an optional add-on that covers the betterment, so you can have new original parts without paying the difference. InsuranceInfo names a waiver of betterment add-on and asking for second-hand parts as the two ways to avoid betterment charges.
At Great Eastern General the add-on is called Franchise Workshop Betterment Extension. Its motor insurance page describes it as covering repair costs with new parts, up to your car's market value, and its product disclosure sheet lists it as a non-tariff add-on and refers you to the quotation for it. Like any add-on, it has to be on your policy schedule before the accident; you cannot add it at the workshop.
Who it tends to suit:
- Cars aged about 5 to 10 years that you plan to keep and want repaired with original parts.
- Recond cars, which reach the betterment age earlier because their age runs from the manufacture date.
- Cars driven daily in heavy traffic, including e-hailing cars, where small knocks happen more often.
It may matter less if you are happy with second-hand parts, or if the car's market value is low. Ask for the terms in writing: the limit, which workshops qualify, and how the cover works with your excess. I give my clients the plain answer, including when I think they do not need it.
This guide is general information on BNM's claims rules, not legal advice. Your policy wording and your insurer's written offer decide each claim.
Before your next repair or renewal, let Lulu check your car policy
If your car is 5 years or older, or it is a recond, the simplest step is to send me a photo of your policy schedule on WhatsApp. I will check:
- the car's age for betterment, especially the manufacture year for a recond;
- whether a betterment waiver or extension is on your policy, and its terms;
- whether the sum insured matches the market value, so the average clause does not cut your claim;
- whether every regular driver is named, so the RM400 compulsory excess does not surprise you.
If you have just had an accident, send me the offer letter and I will go through the parts choice and the betterment figure with you before you sign. I can also renew your car insurance together with your roadtax; see car insurance and roadtax renewal.
I am based in Seri Kembangan and look after car owners across Kuala Lumpur and Selangor, in Mandarin, English or Cantonese. No hard selling: if your car does not need the add-on, I will tell you so.