When choosing a life insurance policy, many people tend to choose a company based solely on the lowest premium. However, it is essential to be aware of six critical factors that indicate financial stability, claim handling efficiency, and customer satisfaction. Only by evaluating these factors can a reliable insurance company be selected.
Claim Settlement Ratio (CSR)
This is the percentage of how many claims an insurance company settles in a year. Try to choose companies with a claim settlement ratio of more than 95 percent.
This ratio should be evaluated in two ways, depending on the number of claims settled and the amount paid. The amount-based ratio shows how much of the total claim value the company actually pays, especially in high-value or complex cases.
Solvency Ratio
This ratio indicates whether the company has sufficient funds to pay claims even in tough economic conditions. The minimum solvency ratio prescribed by the Insurance Regulatory Authority of India (IRDAI) is 1.5 (or 150%). Companies above this limit can be assured of better financial stability.
Persistence Ratio
This reflects how many policyholders continue to pay their premiums on time. A high persistence ratio is an indication that customers are satisfied with the company’s products and services.
Grievance Redressal Ratio
This ratio shows how many complaints a company receives and how many of them are effectively resolved. Companies with fewer complaints and higher resolution rates tend to have better customer service.
Expense Ratio
This is the ratio of a company’s operating expenses (salaries, marketing, commissions) to its premium income. A lower expense ratio will help the company set aside more money for claims settlement and policyholder benefits.
Customer Feedback
Beyond the above figures, listening to the opinions and responses of existing customers will help you understand the company’s service quality on a practical level.
Evaluating these six factors will help you choose the life insurance company that best suits your needs.
