How to evaluate best Life Insurance companies in India

There are 24 Life Insurance companies in India approved by IRDAI:

IRDAI is the regulatory body for all the Insurance companies in India. Among these Insurance companies, LIC is the only public sector company while all others are private insurance companies. Most of the private sector insurance companies have tied up with International Insurance companies to provide new age life insurance products with additional benefits for the betterment of society.

IRDAI along with regulating the Insurance companies also takes numerous measures to bring consumer awareness on the importance of life insurance in India, yet over 75% of India’s population does not have a life insurance. 

Life Insurance is one of the most vital investments in one’s life, yet only a few know how to evaluate which is the best life insurance company in India based on the fundamentals of the Insurance companies and comparing policies with individual financial needs. 

An average individual in India purchases a life insurance policy with limited information like premiums, tenure, sum assured and process to file a claim. Even among these, premiums are the most preferred point of comparison. Insurance company that offers lowest premiums is usually termed “best life insurance companies in India”

We would recommend you consider the below fundamentals to evaluate Insurance companies to get the real best:

• Claim Settlement Ratio (CSR)

Claim settlement ratio is one of the most important point of comparison. You can get the CSR figure of every life insurance company in India from the IRDAI annual reports, it denotes the percentage of claims settled by an insurance company against all claims received in a year.

It is recommended to select insurance companies having higher CSR for the purchase of a life insurance policy.

Source: IRDA Annual Report 2021-2022

• Persistency Ratio

Persistency Ratio provides you with the information of how much percentage of policy holders have renewed their policies with the insurance companies. IRDAI reports these numbers for all insurance companies at intervals of 13, 25, 37 and 61 months.

It is recommended to select insurance companies having higher Persistency ratio for the purchase of a life insurance policy. 

• Solvency Ratio

Solvency ratio indicates the financial stability of an insurance company as it compares all assets and inflows against the liabilities and outflows. IRDAI mandates all Insurance companies in India to have solvency ratio greater than 150%.

It is recommended to select insurance companies having higher Solvency ratio for the purchase of a life insurance policy. 

• Incurred Claim Ratio (ICR)

ICR indicates the financial ability of the life insurance companies to pay claims. The ICR value is calculated using the value of claims paid against the total claim settled in a year. 

It is recommended to select insurance companies having higher ICR or greater than 75% for the purchase of a life insurance policy.

• Commission Expense Ratio (CER)

CER indicates the expenses paid by a life insurance companies towards expenses such as agent’s commission, advertisement, employee wages, etc. The CER value is calculated as a percentage of expenses made by an insurance company to the net premium collected in a year.

A higher CER would mean the insurance company may increase the premiums in near future. Hence, it is recommended to select insurance companies having lower CER.

• Customer Service

Its difficult to evaluate the quality of customer service before you have purchased a life insurance policy. You may view the ratings and read reviews on the customer services on internet for any Insurance company, however that does not guarantee a good customer service.

Hence, its recommended that you buy a life insurance policy from an insurance agent or advisor who can be your point of contact for most of your customer service requirement and also guide you in choosing the best life insurance companies in India.