How to choose best insurer?

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

arvind.trivedi79@gmail.com

www.artofinvest.com

Banks Role in Insurance Distribution Business

Banks role in Insurance Distribution Business

As the financial year 2013-14 is approaching towards its end. People are rushing for tax saving investment options and for tax saving insurance product is very popular among the investors. However, in my personal opinion it becomes very toxic product if you mix your insurance need and investment. Insurance mainly sell by individual agents, brokers, direct selling and banks.  

Banks are the main contributor in the sells figures of private insurance companies products. In India, people have immense faith on banks. They still prefer bank FD even the net inflation adjusted post tax return is very poor. Due to this blind faith on banks, common investors become a victim of mis-selling of these products. I met a lot of cases almost in every investor meet of mis-selling by the banks. The complaints of mis-selling by banks are increasing. Due to this mis-selling complaints, bank regulator RBI has proposed the new guidelines for selling of insurance products. The main RBI proposal as given below:

• ·         A bank’s NPA should be less than 3%
• ·         It should have made profits for last 3 consecutive years
• ·         A bank’s net worth should be at least Rs 500 crore

The government is also planning to mandate multi insurance companies sales for bank. At present banks are selling only one company’s products. The insurance regulator IRDA has also capped a bank’s sale of joint venture partner’s products at 25% of the overall.

In fact the aim of insurance sales by bank is to increase the reach among the maximum people as banks have wider branch network across the country. The above mentioned proposal by RBI, IRDA and govt are not fully implement. We hope that after implementing these guidelines mis-selling would be stop to some extent. However, insurer would not allow implement these guidelines in very smooth manner.

For more detail and any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com 

Insurance Sector Update - November 2013

Insurance Update – November, 2013

I am starting for now onward to simple update on insurance industry time to time. Insurance is very vital and critical part of any financial plan. It is our duty as an advisor and planner to inform our readers to update about this industry. A lot of regulatory activity is going on and companies come with new customized product. Every investor must know about this. Some recent update as given below:

• According to FICCI report, General insurance industry may touch gross written premium (GWP) 3 lakh crore by 2025 with a conservative growth rate of 13% CAGR. According to report that increased health insurance awareness would increase the opportunities in this sector.

• National Disaster Management Authority suggested that insurance should be mandatory for residential properties, malls, theaters, hospitals and hotels. It also be recommended that it should be applies on all urban property tax payers.

• Insurance regulator IRDA has increased investment limit in various category. Now general insurance companies are allowed to invest upto 1.50% or Rs, 3,500 crore in liquid mutual fund. It is for temporary time and can be reversed at a later stage.

• Life insurance companies now can invest upto 5% in FD schemes of promoter group bank. Earlier the limit was 3%. IRDA has also increased  invest limit to invest in information technology and industrial sector from existing 15% to 20%.
• Reliance life insurance has launched policy revival drive. In this campaign lapse policyholder can revive their lapse insurance policy without any penalty and medical tests subject to conditions. This offer will available till 30^th November, 2013 for all reliance insurance products.

• IRDA wants insures to stop giving high incentives to auto dealers. For pushing motor insurance policies sales, insurers offering high incentives to auto dealers and due to this policy holder are paying unreasonable premium.

• IRDS has also proposed to set up insurance clearing house. For smooth functioning of reinsurance and coinsurance business IRDA want to establish “Insurance Clearing House”. It would be promoted by Indian insurers, reinsurers and the authority.

For more detail and any other query related investment, you can contact me through my email

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com