How to choose right Insurer..?
Now a days, people are realizing the
importance of insurance. In India, the penetration of insurance is still low
when compare with the rest of the world. However, now more and more people are
to cover themselves. The financial adviser and regulator also play very vital
role to spreading the insurance cover across the country. Now the big question
is how to select the good insurer. There are many private companies in
insurance sector and it has become difficult to choose the best one. We are
going to discuss here some parameter about the insurance companies which we
should consider before purchase any insurance product.
Financial
strength of Insurance company:
It is very
vital parameter which you should consider before purchase any insurance
product. For all insurers, IRDA has set the working Solvency Margin Ratio which
should be minimum more than 1.5 times. Solvency Margin Ratio is a ratio of
actual solvency margin to the required solvency margin. In simple world,
Required Solvency Margin is the amount of company’s capital exceeds its
projected liabilities. It tells the financial health of the insurance company.
It means the more higher ratio the more safer company.
Past Performance:
If you go with traditional plans then you should
know about past declared bonuses by the company. If company controls the
expenses and policy lapse rate successfully on a consistent basis then there is
possibility to get good return. In reality the companies are not beating
inflation so real return almost nothing or negative from insurance product. It
is better go with pure term insurance plan as insurance is not good for
investment product according to me.
Claim
Repudiation Ratio:
It shows
the number of claims settled against the number of claims processed with
consideration of amount of claim. The company with the lowest Claim Repudiation
Ratio is considered a good life insurance company.
Credit Ratings:
In India,
credit rating agencies like CRISIL, ICRA and CARE gives the rating to insurance
companies after evaluating the financial health, claim ratio, expenses and many
other factors. It is an opinion of the credit rating agencies after assessment
of the company. Many companies are still not rated by any agencies in India.
Expenses in insurance product:
Many of
policyholder don’t know the charges of the policy which they are here going to
purchase. In ULIP product the charges are clearly mentioned in the policy
document which comes after purchase the policy. You can cancel the purchase if
you are not satisfied with the charges within 15 days after issuing the policy.
You must read your policy document carefully to know the exact term and
condition.
If you want more information
regarding investment or you have any other query about investment feel free to
ask us.
Warm regards,
Arvind Trivedi
Certified
Financial Planner
