As per the IRDAI website, there are 24 life insurance companies operating in India. All of them are doing their best to pursue the customer. But which one is the best life insurance company is very subjective. It depends on the customer’s life insurance needs and which company best satisfies the customer’s needs. However, there are certain parameters that we can look at across all life insurance companies and accordingly arrive at which is the best for us. These parameters include:
1) Claim Settlement Ratio (CSR): In very simple terms, claim settlement ratio (CSR) means, out of every 100 claim requests received by the life insurance company in a particular year, how many claims did the company settle. The higher the claim settlement ratio for a company, the better for customers. Let us check the claim settlement ratio for some leading life insurance companies in the last 5 years.
As you can see from the above table, most companies have a claim settlement ratio of above 95% which is good. In simple terms, it means they are settling more than 95 claims out of every 100 claims that they are receiving every year. Also, if you observe the data for the last 5 years, most companies are improving their respective claim settlement ratio with every passing year, which is a healthy trend.
2) Need based innovative products: The next thing you need to check is whether a life insurance company is offering you products that satisfy your life insurance needs. Let us understand this with the example of term life insurance products that are the basic need of every customer. A basic term life insurance product is one that offers lump sum payment to the family if something happens to the insured. But, over the last few years, customer needs have changed. Accordingly life insurance companies have done market research, thought out of the box and have come up with innovative term life insurance products that meet the ever changing needs of the customer.
Some of these examples include:
a) LIC Tech-Term Plan: The plan offers the customer a choice of level sum assured or increasing sum assured. In the increasing sum assured option, the basic sum assured increases by a certain percentage for specified years to take care of inflation.
b) Kotak Life e-Term Plan: This plan offers an option to the customer to increase the life insurance cover during special occasions. These include 50% additional cover on marriage, 25% additional cover on child birth, 50% additional cover on taking a home loan, 25% additional cover on 1st, 3rd and 5th policy anniversary. This gives additional life insurance cover when responsibilities increase.
c) SBI Life’s Poorna Suraksha Plan: This plan provides a dual protection benefit i.e. a life cover and an inbuilt critical illness cover for a wide range of 36 critical illnesses. At the time of policy purchase, the basic sum assured is split between life insurance cover and critical illness cover in 80:20 proportion. Depending on the policy term chosen, the critical illness cover will increase by a certain percentage every year and the life insurance cover will decrease by the same amount. After diagnosis of any of this critical illnesses, the insured gets a lump sum amount which can cover the treatment cost and the future premiums will be waived off completely.
Let us take an example to understand how the rebalancing happens between the life insurance cover and critical illness cover. Rajesh has bought SBI Life’s Poorna Suraksha Plan with a sum assured of Rs. 1 crore for a tenure of 10 years. In this case, the critical illness cover will increase by 15% every year in the following manner.
As can be seen from the above table, Rajesh’s critical illness cover is increasing by 15% (of basic critical illness cover of Rs. 20,00,000) or Rs. 3 lakhs every year. At the same time, Rajesh’s life insurance cover is decreasing by the same amount of Rs. 3 lakhs every year.
Waiver of premium: Another standout feature of the SBI Life’s Poorna Suraksha Plan is the waiver of premium on diagnosis of critical illness. Suppose, Rajesh is diagnosed with a critical illness in the 7th year of the policy. In this case, the critical illness sum assured of Rs. 38 lakhs will be paid immediately as lump sum. From this stage, all future premiums will be waived off. The policy will continue with a life insurance sum assured of Rs. 62 lakhs, which will remain constant for the remaining policy tenure. In the case of an unpleasant incident in the 9th policy year, the life insurance sum assured of Rs. 62 lakhs will be paid to the nominee/legal heir.
An innovative product like SBI Life’s Poorna Suraksha Plan is the need of the hour as it provides a need based solution to customers. It provides life insurance and critical illness cover in a single product with yearly rebalancing. The product comes with an inbuilt waiver of premium on diagnosis of critical illness. Besides, SBI Life along with its bancassurance partner SBI Bank has the widest physical reach on the ground. The company has a good claim settlement ratio of above 95%.
3) Value for money: While the above mentioned need based innovative products are the need of the hour, what is even more important is, they should be affordable to the masses. You should choose a life insurance company that gives you the most value for your money. The premium charged is one of the important deciding factors as customers have defined budgets.
4) Ease of access: The next point to consider is how easy it is to reach out to the life insurance company. All life insurance companies can be reached out to through call, email, SMS, etc. You need to check how easily you can reach out to the life insurance company through its offices or bancassurance partners. For example, SBI Life Insurance Company has 940 branches across India and its bancassurance partner SBI has a network of 22,000 branches across India. A large and productive agent network comprising of 130,418 agents, as on March 31, 2020. No other life insurance company has a wider physical reach than this.
5) Claim settlement time: As per the IRDAI’s Protection of Policyholders’ Interest Regulations 2017, a life insurance company has to settle the claim within 30 days from the date of receipt of all required documents. While this rule is applicable to all life insurance companies, you should check which companies promise to perform better than these regulations.
For example, Max Life Insurance Company has an InstaClaim promise. Under this, any claim that qualifies for InstaClaim will be paid within 1 working day from the date of submission of all mandatory documents. The eligibility criteria includes: Claim amount should be up to Rs. 1 crore, policy should have been in force for a minimum of 3 years, all mandatory documents should have been submitted before 3:00 PM at any Max Life office from Monday to Friday, claim does not warrant a field verification.
The above are some of the parameters to identify your best life insurance company. Let us quickly summarise the parameters:
1) The higher the claim settlement ratio, the better. Preferably the CSR should be 95% and above
2) The life insurance company should provide you a need based solution for your life insurance requirement.
3) The premiums should be affordable and should provide the best value for money
4) The company should be reachable through all channels like call, email, SMS and should have a good physical on-ground presence
5) The time taken for claim settlement should be much lesser than the maximum period of 30 days as specified by IRDAI
Any life insurance company that fulfils all or most of the above parameters is your best life insurance company in India.
credits to Gopal
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