We all know the importance of life insurance in our investment portfolio and yet many of us make the mistake of buying a plan without doing the necessary background check of the insurer. Though all insurers are registered with the Insurance Regulatory Development Authority of India (IRDAI), not all of them enjoy great credibility. A lot depends on the quality of their products and services while customer reviews can help you gauge if they are worth your consideration.
Look into the following features before buying a policy from a company.
Claim settlement ratio
Try to trace which insurer takes more time to settle the claims of its customers. Looking at each company’s claim settlement ratio will give you an idea of the proportion of early claims settled by insurers in India. According to the annual report of the Insurance Regulatory and Development Authority of India released early this year, LIC's claim settlement ratio was 98.62 percent in FY21 while the ratio of private insurers was 97.02 percent during the year.
Many people do not look beyond the insurers’ claim settlement ratios. However, you must look at every insurance company’s lapse ratio too. As evident from its name, this ratio talks about how many policies had been forfeited during the year. The lower the ratio, the higher the acceptance of the insurers’ policies, thus, indicating the high integrity of the insurance company. However, a high lapse ratio can be due to the company’s sales professionals misselling policies or slow response to customers’ queries or poor servicing.
There is a lot at stake in the insurance market. What matters is if you have bought the right insurance policy from the right insurer.