Categorized | General Insurance

how secure are private insurance companies?

When we talk about investment then investing in an insurance company is quite a safe bet. Not only does it help your corpus grow but also provide you with a service.

On the contrary people have apprehensions about investing in a private insurance company. Due to the vast demand of investment, there has been a sudden increase in various financial instruments which suits the needs of individual and keeping in view there have been a sudden increase in various private companies which offer security in the form of insurance. Due to their less experience and less credibility people often do not have blind faith in them. Following are few of the questions which often haunt them:

•Is it safe to invest in private insurance companies?
•Will they get back their initial investment?
•Will they get enough benefit or growth in their investment upon maturity?
•Is the company credible enough to sustain during market volatility?
•In case of death or maturity, will the Claim be made easily?

In spite of the above questions, there are several reasons as to why people are opting for private insurance companies and are also quite content with them.

1.IRDA which stands for Insurance Regulatory and Development Authority regulates all the insurance companies. IRDA has very strict guidelines which have to be adhered to by all the private insurance companies.
2.The solvency margin which has been regulated at Rs 150 crores has to be maintained by every insurance company and also acts as a regulating factor. The IRDA lays strict provision of submitting this to the reserve bank of India. This has to be maintained in order to pay the claims to the customers whenever the need arises. This solvency margin is not always fixed and keeps on changing according to the portfolio.

3.Each Insurance company registered under IRDA is associated with a Reinsurance company. In case the Insurer is unable to pay the amount of the claim which is high, then the re-insurance company takes up the liability of repayment to customers.

4.One has the right of approaching the Insurance Ombudsman in case of any dispute or misconduct by the private insurance company. The Ombudsman acts as a dispute settling agency between the Policyholder and the insurer. The decision which has been taken by the ombudsman is strict for the insurer but not for the policyholder. If the policyholder is not happy with the Ombudsman’s decision, then he can also approach the Consumer Forum or the Court of law.

Hence,keeping in mind the above provision it has been seen that the IRDA acts as a watchdog and has taken enough regulations so as to protect the investor. However it is still advisable to do a detailed research before entering into any kind of investment decision. Since the objectives of every investor are different therefore it is advisable to carefully read the terms and conditions of the Policy and also seeks the help of an insurance advisor before entering into a contract.