5 Metrics to Consider While Evaluating Life Insurance Companies
While having a life insurance policy for ourselves and our families is the need of the hour, it is important to choose a quality life insurance policy that serves your needs. The quality of the policy will, however, depend on the life insurance provider and their services.
According to sources, despite the insurance penetration and density in India showing an upward trend and life insurance companies collecting more than ₹5 trillion as gross premiums, the insurance penetration rate in India is still lower than the global average. While this means that the industry has much scope for growth, it also indicates that term insurance or life insurance buyers, in general, are not aware of how they should pick quality life insurance policies.
It is important to choose a good insurance provider if you are looking for insurance policies that provide the protection you are seeking and help you and your beneficiaries in times of need. Be it a policy term plan, a term plan with returns or any other type of life insurance policy, here are five metrics you can consider while evaluating a life insurance company so that you can avail of a life insurance plan of your choice without any hassles.
Given below are five important metrics that help you find a good life insurance provider:
The Persistency Ratio
The persistency ratio of a life insurance company is proportional to the percentage of policyholders who renew their insurance policies with the company. As per the Insurance Regulatory and Development Authority of India (IRDAI), this ratio is measured and reviewed every 13, 25, 37 and 61 months and indicates the customers’ level of satisfaction with the insurance provider’s products and services. Therefore, a high persistency ratio is indicative of a good life insurance company and their offerings.
The Claim Settlement Ratio
The claim settlement ratio of a life insurance company refers to the percentage of claims settled by the provider as against the total number of claims received during the year. This is among the most important parameters when it comes to evaluating a life insurance company since it means that the insurer is able to ensure timely settlement of claims when the policyholder or their beneficiaries are in need. Most insurance providers with a good claim settlement ratio enable a seamless process so that their customers can avail of the benefits without any delay.
However, it is crucial to note that even the best life insurance companies in India with the highest claim settlement ratios are entitled to reject claims in case of incorrect and false information on the policy forms.
The ratio of incurred claims
The incurred claims ratio or ICR stands for the life insurance provider’s ability to pay out or settle the claims. Though many may confuse ICR with the claim settlement ratio, the incurred claims ratio actually refers to the value of the claims settled out of the total amount collected in premiums. On the other hand, the claim settlement ratio is the number of claims settled by the company as against the number of claims filed for the year.
If a life insurance provider has an ICR of 50-100%, it means that the company has been able to collect more money in premiums, thus indicating the company’s decent financial health. But more importantly, it shows that the insurance provider has been successful in offering good quality products and also helping their customers understand when filing a claim is necessary and when it isn’t.
The Solvency Ratio
In simple words, the solvency ratio is the life insurance company’s ability to fulfil its long-term and short-term financial obligations. The solvency ratio is closely related to the financial health of the insurance provider. When buying term insurance for one’s family, this is one of the most important factors that a potential customer should look into.
This is because a company with a low solvency ratio is likely to miss out on settling claims, debts and other financial commitments towards customers or otherwise. Customers believe in companies with a high solvency ratio as it assures them that their life insurance claims will be settled when the need arises.
The Customer Care
It may not be completely possible to understand the customer service of a life insurance company before you buy a product from them. This is where research plays an important part. A lot of well-informed customers make it a point to get in touch with the customer care service at potential life insurance providers and ask questions to understand the initial impression of the customer service team.
What makes the customer service team of any life insurance company so important is their ability to resolve the customer’s queries and issues without any delay. For first-time insurance buyers, the customer service team plays the role of a guide, helping the buyers choose the right products, understand complicated insurance terms and guiding them through the processes for buying a new insurance plan or filing a claim.
When it comes to buying a life insurance plan, getting your choice of plans and policies will largely depend on the life insurance provider.
Tata AIA Life Insurance is one of the life insurance providers in India. We offer insurance products across term insurance, savings solutions, wealth solutions and retirement solutions segments, along with attractive riders# to enhance your base coverage. We not only offer quality insurance products but also ensure that their customers are treated with care, and their queries are handled responsibly.
Most importantly, at Tata AIA Life, we always go the extra mile to provide the best to our customers. To know more, get in touch with us today!