Factors to compare different insurance products

Mr Ajay Kumar is a successful lawyer who lives with his wife and two children (12 and 14) in a swanky bungalow in Hazratganj, Lucknow. It is a lovely Saturday morning, and Ajay jumps into his car to go for a quick game of squash with his friend. 

His car welcomes him as he gets in and adjusts the settings to his preferences. He has enabled a dashboard indicator attached to an app which keeps him informed about all the insurance plans as per his location or choice. 

For example, the insurance app handles his home/health and other insurances while he is at home, and it handles his car insurance while he is driving. Isn't that cool?

As he accelerates onto the main road, the dashboard warns him that his risk rating could worsen if he continues accelerating heavily and braking suddenly. Ajay makes a note to himself to be less heavy-footed on the accelerator. 

Ajay takes pride in proactive management of his financials, including insurance. He reminds himself to do a full review of all his insurance policies on his return. It is 9 a.m. when Ajay gets back from his game. As he starts having breakfast, he is reminded of the drive, and he opens the insurance manager mobile app that shows all different insurance policies purchased by him. 

As he looks at the application dashboard, he realizes how different his insurance experience is today compared to the year 2015 when he took his first steps in finance and insurance planning for his family. There is a prompt offering him a brilliant pension plan. He clicks on the link and is connected for a video chat with his bank's relationship manager. He likes the pension plan demonstrated by him. 

He is amazed to see how the pension plan was customized for his own saving pattern and how similar other customers of the bank had chosen a similar plan. The car insurance dashboard shows a 'thumbs up'. He has earned 5,000 points over the past quarter, which he could redeem at the garage. He earned them because of practising the right techniques to apply acceleration and brakes as suggested by the app (unlike this morning, thank God for sensors) – something he wonders why he did not do before. 

However, he is disappointed that he could not earn the fourth star in the health-buddy program linked to his health insurance. The virtual chat assistant tells him that missing the gym and squash sessions and scheduled health check-ups had cost him the extra star. Before closing the app, he quickly checks the appointment with a home maintenance agency, a partner service of his home insurance policy. 

Does this sound like science fiction? Not really. This story is likely to be a reality in today's world. 

Factors to compare different insurance products:

1. Insurance Type: You will find numerous types of policies in the market. The key is to choose the one that suits your requirement. Each type has its own benefit and will be the most useful if it meets your needs. You can hunt for similar products from several insurance companies, once you have selected a type of policy.
2. Premium: The whole idea of comparing policies is to uncover a plan which provides highest financial support in times of need. Nonetheless, this does not indicate that you pay a hefty price to secure yourself. Comparing policies will help you find an ideal policy that is affordable and provides maximum coverage.
3. Insurance company: The compariosin of health insurance companies help to understand the services offered. You should also study their reviews and user experiences on social media and various other apps. The features stated in a policy document should be as per the terms of the insurance company. A typical insurer will offer a swift turnaround time on your queries and claims. They will have an active customer support centre that will effectively address your questions and help you at the time of claim. Choose a company that fulfils that criteria.
4. Sub-limit: Policies with no sub-limit are generally preferred over policies with a limit. But if your requirements demand a specific type of policy that includes a sub-limit, be sure to select the one with higher limits. Your insurer will bear daily charges as per your sub-limit. If the expenses exceed, you will have to pay the difference. Compare mediclaim policies based on their sublimit.
5. Insurance: Insurance coverage helps users overcome financially from unforeseen events, such as the loss of an income-producing adult supporting a family or car accidents or disability. Insurance coverage is often determined by many factors. For example, most insurers charge higher premiums for young male drivers, as compared to a middle-aged married man with years of driving experience. This is because insurers deem the probability of young men being involved in an accident to be higher as compared to the latter.
6. Claim Settlement Ratio: Claim Settlement Ratio or commonly known as CSR is the percentage of the number of claims paid/given to the clients by the insurer and the total claims received by the company. Formula used to attain the Claim Settlement Ratio is as follows: Claim Settlement Ratio = Total claims paid off by the insurer/ Total number of claims received by the insurer*100. To protect the concerns of consumers, The Insurance Regulatory and Development Authority of India (IRDAI) mandates that an insurer should settle the claim within 30 days from the date of receipt of the last necessary document. In case of delay for the payment of the claim, the insurer shall be liable to pay interest from the date of receipt of the last necessary document to the date of payment of the claim. This will be at a rate of 2 per cent above the bank rate. The objective of the guideline is to ensure that policyholders' interest is protected. It also ensures policyholders' centric governance by insurers with emphasis on grievance redressal.
7. Company Credentials:  CRISIL has been allotting Financial Strength Ratings to insurance companies since March 1998 after assessing their ability to meet policyholder obligations. The rating methodology for general or non-life insurance companies require assessing them on a stand-alone basis and the level of parent support they obtain. 

On a stand-alone basis, factors such as industry and business risks, the risk management systems, goals and strategies, and projected business plan are analysed, apart from examining the financials. Parental support is especially important for start-up insurance ventures, given the need to recapitalisation till they break even and begin generating profits. 

Terms and Conditions: 

• Insurance will be effective and will cover end-to-end customer journeys 
• Insurance will be highly customised and appropriate to each customer personally 
• Interactions will be "phygital" – a amalgamation of physical and digital, though increasingly becoming highly digital 
• Insurers will partner with various service providers to offer end-end services satisfying customer needs. Not just products, technology advances are transforming different industries at an ever-increasing pace. The insurance industry will not be isolated. These advances will be a lot more persuasive as they will have extensive applications across various aspects of the insurance business, including underwriting, sales, claims and customer service. 
• And if this were not enough; the rapidly evolving macro-economic landscape -- lower interest rates, changing customer behaviour, the impact of digital adoption, changing competitive landscape and the dynamic regulatory situation -- all these will keep the C-suite busy in developing and adapting strategies to leverage the opportunities and stave off the challenges. 

On the basis of the above context, we have recognised 12 strategic preferences for insurers that could support in preparing for the insurance of the future.

India’s insurance sector has been increasing significantly in recent years, but its share in the global insurance market remains abysmally low. The Indian insurance sector faces issues such as inadequate investment in insurance products, low penetration and density rates,  deteriorating financial health of public-sector players and many others.

The insurance industry in India has been developing more than ever, with total insurance premiums increasing quickly, as opposed to global counterparts. The insurance penetration (ratio of total premium to GDP (gross domestic product)) and density (ratio of total premium to population) stood at 3.69% and US$ 73, respectively for FY18, which is less in opposition with global levels. These low penetration and density rates show the uninsured nature of large sections of the population in India and the existence of an insurance gap. The sector has moved from being an exclusive State monopoly to a competitive market, but public-sector insurers hold a more significant share of the insurance market even though they are less in quantity. 

Figure 1 displays the insurance penetration and density in India from 2001 to 2017.

Figure 1. India’s insurance penetration and density: 2001-2017

Source: IRDAI Annual Report, 2018.

Wrapping up

Now that you know the Factors to compare different insurance products., it’s only logical that we move on Sneak peek into the future of insurance: fintech and disruptions. To discover, head to the next chapter. 

A quick recap

1. Insurance type, premium, the insurance company,  sub-limit, claim-settlement ratio, company credentials are some important factors to keep in mind before choosing insurance products.