Can You Trust Insurance Companies?

Gone are the days when LIC was the only Insurance operator in the country. With monopoly comes monotony, and the Indian Insurance sector was no different.

However, things have changed since the year 2000, when private insurance companies were allowed to enter the market (in partnerships with Indian concerns, of course).

Since the turn of the millennium, Indian consumers, who were solely dependent on public insurance companies for their insurance requirements, have steadily been offered a greater variety of insurance products as well as have received better service.

Due to the emergence of private insurance companies and the competition between them, the sector has benefited with a more consumer-friendly approach, better plan options, options to customize plans according to life stage and needs of the policyholder, and additional benefits under a single plan.

Here is a comparison chart that lists how private insurers fare against public insurers in the health insurance category:

And then, just as with every other major sector in the country, Insurance went digital. This further facilitated the increasing gap that had been developing between private and public Insurance sector operators.

Since many of us grew up thinking of only LIC when anyone spoke about insurance, it is natural to wonder whether these new players are any good. After all, what guarantee do we have that when a claim scenario arises, these private insurers will keep to their end of the bargain? In short, can they be trusted lifelong?

Are Private Insurance Companies in India Trustworthy?

Go through the following points and take an informed decision:

• IRDAI – It is important to understand that the Insurance Regulation and Development Authority of India (IRDAI) governs different aspects of the Insurance industry. It is strongly involved in the formation and operation of all the insurers in the market and has strict guidelines for both public and private companies, which have to be adhered to. The insurance policies sold by insurance companies (be it public or private) have to follow these guidelines. It also needs to be mentioned that IRDAI has been recognized as one of the most fair and diligent regulatory bodies in the country.
• Formation of Private Insurance Companies – IRDAI has strict guidelines in place for the formation of new insurance companies, making it difficult for fraudulent or small players to enter the market to make a quick buck by fooling people. For example, one of the primary requirements is that Rs 100 crores has to be deposited to IRDAI. Keeping such high entry costs ensures that only financially strong entities can enter the Insurance sector.
• Solvency Margin – Each and every insurance company (be it private or public) has to maintain solvency margin of Rs 150 crores to function smoothly. The solvency margin is basically the amount of money or assets that a company owns after debts are taken away. If the company’s debt increases dramatically due to some reason, the solvency margin will help the company to control such situations.
• Regular Audits – IRDAI works as a watchdog for all insurance companies. It conducts regular audits and inspections in every insurance company to keep a proper check on their functioning. Here is a look at the top 10 life insurers in India by their Claim Settlement Ratios in FY 2017-18:

• Insurance Ombudsman – If the policyholder has any complaints or disputes with their insurance company, s/he can approach the Insurance Ombudsman. The Insurance Ombudsman reports directly to the Government of India and exists solely to settle customers’ valid grievances quickly in an out-of-court, impartial, and cost-effective manner.
• The Merger Clause & Exit of Private Insurance Companies – If getting into the Insurance sector is difficult, then getting out of the Insurance sector is even more so. IRDAI does not allow any insurance company to stop their business and walk away from their customers. As per IRDAI guidelines, if a company cannot continue functioning due to some irrevocable reasons, it must merge with some other existing government-run insurance company, of which there are several. The implementation of this step ensures that customers of the existing company are not left unattended.

By implementing these steps, IRDAI ensures that private or public sector insurance companies deal with their customers respectfully without indulging in any fraud or untoward practices. Hence, one can trust private insurance companies completely in India. They are as reliable and trustworthy as Public insurance companies.

All you need to do is keep in mind your needs, age, income, dependencies, and factors like inflation while buying a policy.