Even a cursory review of the insurance products on display indicates two things, one -- there are too many products which only tends to confuse the consumer and two -- more often than not there is very little to choose from in terms of product differentiation.
This makes your task as an insurance-seeker that much more crucial as insurance is a long-term association (extending for as long as 30 years) and you would not like to be stuck with the wrong insurance company.
We have outlined a few crucial points that you need to weigh very carefully before you associate yourself with an insurance company.
Financial track record of the insurance company
The financial well-being of an insurance company is probably the most important factor that must influence you to take insurance from a particular company.
In the Indian context where an experienced foreign player is involved, the financial performance of the foreign partner is equally important. The financial performance can be judged on the basis of the claim amount settled, frequency of claims, rating given by an independent international rating agency like Standard & Poor for instance.
Financial underwriting norms
Financial underwriting means to assess the extent to which an individual should be insured in monetary terms. Generally, an individual should be insured sufficiently enough so that he can continue to lead a lifestyle post-retirement as he was leading before retirement.
With this perspective, he should probably look at getting himself insured up to 10-15 times his annual salary. So ideally you should stick with an insurer that follows prudent financial underwriting norms.
Certain insurance companies in their enthusiasm to expand their policy base may undertake to insure a larger quantum of risk than necessary. In this way they overexpose themselves to enhanced risk levels.
Insurance being a matter of sharing risk, financial underwriting becomes an important factor in determining future liabilities of the companies.
Insurance agent
The consultant/agent of the insurance company is the link between the insurance company and the individual applicant.
Often it is observed that applicants freely discuss various issues with the agent including medical ones like a heart problem running in the family or hereditary diabetic problem.
Some times the agents are also cooperate by not revealing these sensitive details to the insurance company.
You as an applicant must understand that the agent is putting the premiums contributed by other applicants at risk by not disclosing your true medical condition. He could well cooperate with another applicant in future by concealing his true medical history, and put at risk your premium. So when you apply for an insurance policy you ought to consider these details.
Management's pedigree
Another factor that coincides with financial stability is the management of the insurance company. (Financial stability is generally a direct consequence of good management).
As in other industries, life insurance also thrives on good management and if anything, given the sensitive nature of the industry, it needs a solid management at the helm more than the others.
In the Indian context, both partners should have a lot of integrity and experience in the financial sector. If the Indian partner already has a history in a financial field like housing finance and banking and also has an AAA rating to boot, that should tell you something about the company's proficiency.
If you are considering taking life insurance, you may want to weigh the factors that we have highlighted above. You must understand that taking a life insurance policy needs a different approach than investing in a bond or a fixed deposit.
Life insurance involves a longer commitment and a larger amount that will you/your survivors at a time when they need it the most. So don't get carried away by what your agent tells you, do a little homework on your own for a change.
