When it comes to life insurance plans, many individuals are very specific on the company from which they buy the policy. And with the large number of players that are present in the market, the job just gets tougher. Should you go for low premium, high returns or simply go with a trusted brand? When it comes to general insurance policies like motor or health insurance not many are as particular. A big deciding factor would be the premium which is being charged – the lower the premium, the better it is. Well this is not always true and it might make sense to start looking at it with a slightly more analytical mind. When it comes to health insurance plans, most people are not very concerned with buying a health insurance policy as they are being cov-ered by their employer. Well, things are changing and they are changing fast. A lot of companies force you to bear some part of the premiums for the health insurance and some companies have even stopped offering health insurance plans to employees. Insurance companies too find this portfolio expensive and will gradually shy away or increase premiums dramatically. Same is the case with motor insurance.
You will increasingly find insurance companies refusing to offer a policy for a certain type of car in certain cities. All this is because general insurance companies have gradually started looking at their portfolios and are trying to move into the more profitable ones. And when the low pricing does not make sense, the companies have gradually started increasing their premiums. There are some insurance companies who don’t go after the numbers and hence have smaller but more profitable portfolios and increasingly this will be the norm. Well, that’s when it makes sense for you also to start making wiser decisions. With increasing premiums it might make sense to start buying policies from companies who not only sell their policies but also service the claims. While every company has the right to refuse any fraudulent claim, the large number should average them out and we can check which companies have a better claims ratio. Claims ratio, simply put, is the claims processes compared to the amount of premium collected. The higher the claims ratio, the more the company is paying out as claims as a percentage of the amount of premium it has collected.
Non-Life Insurance Companies' Claims Ratio Chart
While most insurance companies work towards reducing the claims amount and hence the ratios, this should be achieved by better underwriting norms and not by refusing claims. It is a tough balance to achieve and general insurance compa-nies have a really tough job in differentiating between fraud-ulent claims and systems. But that’s the worry of insurance companies, as consumers we should go in for companies who process claims efficiently and quickly without causing any pain to the consumer.
So, the next time you decide on buying a policy it might make a lot of sense to check the claims history of the compa-ny. And this applies to all types of policies. We have focussed here on health and motor insurance policies as they are usu-ally annual plans and can be renewed every year. So you can go in for a better choice the next time you renew. In the case of life insurance policies, since the policies are usually for a much longer period of time, it may not be possible to shift midway always. Hence it makes a lot of sense to do some research before making the final choice. There is no point in trying to save a thousand odd rupees in a year, when what may be at stake is a claim of a few lakh rupees.