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LIFE INSURANCEHow to choose the Right Insurer?"As insurance is a long-term contract, customer stickiness is important while judging the standing of a life insurance company. Customer loyalty is a function of returns and service. "Life Insurance:The Insurance Industry is undergoing sea change- enforcing new norms, regulations, changes by regulators, as per the need of the hour! Currently with 22* Life insurance companies operating in India, (*as on Dec 2011) with new plans, new financial products, revised plans, with catchy names! Sometimes the plan may or may not be catchy!Some more changes, - like, newcomers, mergers, takeovers may happen!! In the insurance sector, a common man will have to struggle through in making right decisions! The RIGHT decision makes the difference, to reach his financial goal! And to get the benefits The most common question we come across,"How safe is it to purchase insurance from a foreign insurance company which have Joint Partners in India? " It is safe to purchase insurance from foreign insurance companies. Since 1999-2000, many foreign insurance companies have established their offices in India, along with their Joint Ventures partners as Indian companies. All these companies are required to strictly follow the guidelines released by the Insurance Regulatory and Development Authority of India (IRDA). Moreover, all these companies have a minimum paid up capital of Rs 100 crore. This paid up capital ensures that all your investments through these companies are safe. Solvency Margin:You can also look into factors like,Solvency Margin in Indian Insurance Companies "One may wonder as to whether the insurance premium Paid by him is safely invested and whether he would get back his sum assured at the end of the maturity period? " Every insurance company is required to maintain solvency margins based on its volume of business and as per the guidelines stipulated by the IRDA. Hence, one need not bother as to the investment of his capital with any insurance company The solvency of an insurance company corresponds to its ability to pay claims. An insurer is insolvent if its assets are not adequate [over indebtedness] or cannot be disposed of in time {illiquidity} to pay the claims arising. The solvency of insurance company or its financial strength depends chiefly on whether sufficient technical reserves have been set up for the obligations entered into and whether the company has adequate capital as security. The Solvency Margin also denotes the capital base, defined as the surplus of assets over liabilities. It is often called shareholders' funds [in the UK] or policyholders' surplus [in the USA].On the other hand, the Life Insurance Companies in India have been asked to maintain a 150% Solvency Margin which includes a 50% additional cushion over and above the norms specified in the regulations. How to choose the Right InsurerThe 9 Parameters:The life insurance industry has changed not just in terms of the number of Players and product offerings but also in the way, the products are bought. We should look for some of the parameters before investing / Purchasing / associating ourselves with / their Life Insurance plans. 1. Credibility of the Company:Every insurer is under the regulator, IRDA. 2. Point Of Service (POS):Key factors that need to be looked at while measuring the Success of an insurer is the reach it has through its sales force and the number of locations and offices from which it operates. Point of service is, the point where we could reach, like a branch or an associate, or like a source of place we could reach to take any help, if need be. Many of the private Insurerers may not be able to provide a spread like the Public Insurer, still there could be a point of source. Of course, today we can reach tem by cyber contacts. We should think of their turnaround time, an important factor to consider before taking a Life insurance contract. 3. Claim Settlement Ratio:"In the business of insurance, the timely settlement of claims is a vital function that needs no special emphasis. The claims settlement record of an insurer is, therefore, the touchstone of its performance." - IRDA's annual report, 2010-2011. Settling of claims while deciding on a term plan, the biggest point which a person concentrates is the claim settlement ratio. Though many of the companies settle, herein we should look at the Time factor it takes to settle. Private insurerers like Kotak Life Insurance has track record of settling 99% of their claims within a month! The list of all the Insurance companies in India with the claim settlement ratio data can be sourced thro' annual reports of IRDA portal & other sources of those respective web sites 4. Fund Management & Fund Performance:Every company will be investing their funds in some portfolio or other. In traditional plans, if it's a participating plan, the earnings are declared at the end of the year, as bonus to the investors. These funds are not transparent, & need not be as a tradition in the Industry. But In case of ULIPS, Transparency is a must. As a client you should know in which of the funds you have opted for (check with your bond / proposal form, at the time of opening / login of your policy). You have the option to switch from one to another! (Call for the details, some companies offer free switches limited to 4 or 5 in a year! some companies charge for these, pl. Check with your Insurer). Which of these Funds are invested in which of the companies, in what ratio, and how the fund performs are available in monthly fact sheet of the Insurance companies. You go reach them thro their websites. (Pl. Find here a link for specimen copy of the monthly fact sheet. < click here>) As for as ULIPS are concerned, you 'all find the wordings, as a precaution, "IN THIS POLICY THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICY HOLDER..." So this is a crucial point for you to watch the performance of the fund you have invested. i.e.: Your outcome of the investment lays here. Its better you take control of the switches, monitor, take some expert comments if needed. 5. Transparency:The happenings, in the company, of the company should be reachable to you, before taking a decision of your life Insurance plans. You can find / search thro web, / authenticated news from print media, the details about the company. Some company's web sites are providing these details. A major issue confronting the industry is disclosures. Hence, an equally important parameter is the pieces of Information an insurer reveals and the ones it does not. Life insurance industry is capital intensive, and insurers are required to infuse capital at regular intervals to fund both the new business strain and to expand their infrastructure base including expenses on initial operations, training costs for development of the distribution channels, creating niche markets, achieving reasonable levels of persistency. The experience of the insurance markets globally indicates that companies in the life sector take seven to ten years to break-even Insurance industry as such is capital intensive Industry, requires large capital, and to sustain it needs to maintain a good clientele value is not just an easy task. Keeping pace with the competition, following the regulations, sustainability is a factor to be thought of. Profitability is a point to consider. With the entry of private Insurers' in 2000, the industry is growing and has potential to grow! We understand from last three years( since 2008-09) Annual reports of IRDA, during 2008-09 only 4 out of 22, during 2009-10 only 8 out of 23, and during 2010-11 only 12 out of 23 in 2010-11, life insurerers are in profit, and might be ONLY 3 or 4 life insurers are continuously in profit, meaning persistency ! Others have just break even or not in continuance! [For your info, and better understanding you can check with annual reports of through their website.] 7. Media Reports:One should take interest to know about the Insurer ,the points like, ... Any adverse happenings?, Any adverse remarks or adverse happenings, if any .?, etc , about the company, their plans etc., we have to check thro the media - print, news, web etc, just to keep an edge over the info of our insurer. 8. Best Plan Option & Verity to fulfil our needs: Pl. Understand your insurer has various plans for different needs of your life style & requirements. At different stages of life, we need to choose the plans that matches our needs - like simple term plan, child education plan, daughter /son marriage plan, retirement plan, wealth creation plan etc. some companies may have some limitations on this, which needs to be checked. i.e.: check if your insurer has plans that will suite your present need & future needs! 9. A Good & Honest Advisor: Finally you should look for the Life Advisor, (some companies' advisors, still they mention themselves as 'agent'); of the insurer you are going to stick on with. We suggest here the following points to be looked in to with your Life Advisor. Don't you think now, it's although task to locate the right & honest Advisor & the right Insurer for your need? Your search ends here!!To your specific needs you can feel free to mail to us: info@growmoneyfincorp.com. |
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