The solvency margin of each company is published in the IRDAI annual report and can be compared on this basis.
By AP Singh & Pallavi Seth
The Covid-19 pandemic was a wake-up call to the importance of life insurance in challenging times. Life insurance is still a long way from being a pull product, but it has achieved nudge status. The second half of 2020-21 saw business premiums grow by 16% year-over-year, with more people choosing to purchase single-premium policies (to protect against future loss of income).
While it is good that people are becoming more and more conscious of purchasing life insurance, it is equally important to choose the right life insurance company. The following factors should be considered when choosing a life insurance company:
Claims Ratio: The Claim Settlement Ratio (CSR) is simply the percentage of claims settled by an insurance company in relation to the total number of claims received annually. A high CSR shows that it is easier to settle claims with the company. When assessing the customer friendliness of life insurers, the claims settlement rate is given a lot of weight.
Products Offered: After the pandemic, consumers are looking for better life insurance products and more personalized options. Flexibility in payment transactions, innovative products and personalized solutions are the order of the day. Customers should review the company’s product features, drivers, covers, and terms and conditions. Web aggregators provide a clear comparison of insurance products and can help you make the right decision.
Tech-savvy companies: With the increasing focus on social distancing and contactless transactions, more and more consumers are turning to buying and extending life insurance online. Customers should opt for companies that offer digitally capable omnichannel systems and better online functionalities.
Solvency margins: The reputation and financial strength of the insurance company’s promoters is very important to understanding whether it can prudently manage the policyholder’s fund and whether it would be able to meet its obligations. To understand the financial strength of the insurer, the solvency margin should be understood. A company’s solvency margin is a measure of its ability to meet its debt, receivables and other financial obligations.
The higher the solvency margin, the better the insurance companies are when it comes to claims settlement. According to the IRDAI, insurers must adhere to a minimum solvency margin of 150%. The solvency margin of each company is published in the IRDAI annual report and can be compared on this basis.
Service quality: The professionalism of the agent or the sales representative speaks a lot about the company. It is important whether the agent listens patiently and understands the client’s needs or is busy making a sales pitch without worrying about the client’s financial needs. The final decision should only be made if you are satisfied with the performance of the sales force in the first few meetings.
Reviews and ratings: Reviews and ratings of insurance companies can be very helpful in choosing the right insurer. While some of these can be counterfeited and generated through competition, a number of similar complaints against a company should not be ignored as they are a barometer of customer satisfaction.
As a buyer, one shouldn’t give in to pressure from insurers or government agencies and focus on buying the right product with the right company based on their needs.
AP Singh is a director and Pallavi Seth is an assistant professor at the Amity School of Insurance Banking & Actuarial Science
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