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Business News/ Money / Personal Finance/  Life insurance: Evaluate your insurer based on 3 key parameters
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Life insurance: Evaluate your insurer based on 3 key parameters

Life insurance is an important component of financial planning in India, offering protection and security for loved ones. When selecting a provider, individuals should prioritize those with high claim settlement ratios and swift turnaround times.

What factors should you consider when selecting a life insurance provider?Premium
What factors should you consider when selecting a life insurance provider?

Life insurance plays a key role in every Indian’s financial planning strategy. It is not just a component; it serves as a key safeguard for securing one’s future. It is paramount to understand the focal role of life insurance in protecting your loved ones from unexpected life events, particularly given the absence of a robust social security net in India. It is not only important to include life insurance in your financial plan, but also a necessity. The mantra individuals should follow when developing a financial plan should be to ‘protect and save.’

As individuals realise the significance of including life insurance in their finances, choosing the right life insurance provider becomes crucial. Life insurance products are purchased for the long-term and changing mid-way is not an option as premiums rise with age.

Life insurance is a promise made by the company, on behalf of the policyholders, to provide financial security to the family in their absence. Hence, choosing wisely means having a stable and reliable insurance partner to support your financial plan. This begs the question, what elements should you weigh in on when opting for a life insurance partner?

Quarterly claim settlement showcases consistency

Typically, when individuals purchase life insurance, they focus on policy specifics such as benefits, features, premiums, and the annual claim settlement ratio. They may also depend on advisors, agents, family or friends and social media for guidance. Since relying on the annual claim settlement ratio can be misleading, individuals should study the consistency with which the insurer has settled claims throughout the year. Therefore, it is imperative to evaluate the claim settlement ratio on a ‘quarterly’ basis.

The claim settlement ratio represents the proportion of claims settled against the total number of claims received in the period. For instance, an insurance company receives 100 claims in a quarter, of which 98 were settled. The claim settlement ratio in this case equals 98%. A higher ratio signifies an insurer’s commitment to delivering on its promise, ensuring nominees receive the claim proceeds in their hour of need. After all, you purchased life insurance to provide financial security to your family.

Evaluate the claim settlement turnaround time

Another aspect individuals should evaluate along with the claim settlement ratio is the average turnaround time to settle claims. What really makes the claim settlement ratio even more potent is when it is studied in conjunction with the turnaround time of life insurers in settling claims. This denotes the duration taken by an insurance company to settle claims. For instance, life insurers have implemented service initiatives such as ‘Claim for Sure’ which settle eligible claims in one day after all documents are submitted.

While declaration of claim settlements is mandatory for insurance companies, declaration of the claims settlement turnaround time is purely voluntary and only customer-friendly life insurance companies do it of their own volition and as a matter of transparency.

The combined effect between claim settlement ratio and turnaround time presents a comprehensive view of an insurer’s performance. A high claim settlement ratio coupled with a swift turnaround time portrays an insurer’s reliability not just in settling claims but also ensuring nominees/claimants receive the rightful dues promptly.

Life insurers and customers share joint responsibility

The magnitude of life insurance in one’s financial portfolio cannot be exaggerated. When selecting a life insurance provider, individuals must focus on those with high claim settlement ratios and swift turnaround times which serve as robust markers of reliability and commitment to serving policyholders diligently.

The responsibility doesn’t squarely rest on the shoulders of life insurers, customers should ensure that all health and material information is truthfully disclosed at the time of purchase. This will ensure a smooth claim settlement process for the nominee.

In essence, a judicious blend of these metrics offers a comprehensive evaluation, ensuring a secure and dependable financial shield for loved ones in uncertain times.

Amish Banker, Senior Executive Vice President, Customer Service & Operations, ICICI Prudential Life Insurance Company Limited

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Published: 31 Jan 2024, 09:50 AM IST
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