Are insurance companies fair?

As long as the government is disinclined to act responsibly, nothing can be done. So, you should do some research and compare the services provided by the various insurers and the products they offer, as suggested in the following paragraphs..

SINCE THE dawn of time, some type of insurance or the other has been offered; health, disability, auto, life and home insurance are just a few that can be named. The concept of protecting the policyholder against losses is revolutionary. However noble it may be in thought, today, insurance itself has become a risk factor.

Although insurance is required in most cases, the government does not regulate the insurance industry adequately. It results in policyholders answering questions such as, “Will the insurance company pay for treatment, replacement, rebuilding or even my death?” I am sorry to tell you this but buying any type of insurance policy today is like playing the Russian roulette. It is a potentially lethal form of risk-taking, where the policyholder is, in effect, gambling with his / her life. What is even more disturbing is the fact that the policyholders are forced to play the game while the government and the insurance companies bet on the outcome.

Modern insurance companies are money-making businesses which have little interest in the policyholders other than their credit history. Your credit history does not show that you have made your insurance payments on time and have been with the same company for 20 years. Why do they use your credit history? To drive the tariff up so the insurance company makes more money. Who pays more? The poor and the middle class… YOU DO!!! You can argue it’s not right until you’re blue in the face and you would be right in doing so. However, as long as the government stands on the sidelines indicating its unwillingness to hold itself officially responsible for directing the policies and the organisation of insurance, nothing can be done. So, what can you do? You should do some research and compare the products the various insurance companies offer.

For example,

• When a natural disaster struck, did they compensate the policyholders in most cases?
• How many times they raised the tariff in the past five years?
• Do they attach too many exclusion clauses?
• When you call the company, are you required to deal with a call centre where a staff-member reads from the script or an agent who can answer your questions?
• Do you demand that the insurance company hold itself responsible for directing the policies and the organisation of insurance?

Insurance firms to up micro sector presence

Insurance companies across the board are exploring options to branch out into rural areas and enhance their presence in the micro-insurance sector in the country.

Among the major players, LIC, ICICI Lombard, Agriculture Insurance Corporation, IFFCO-Tokio and Tata AIG are seeking ways to consolidate their presence in the sector. Also, MaxLife has launched Max Vijay to tap the micro-insurance potential.

Incidentally, the Indian insurance industry is expected to witness a 500% growth and reach $60 billion in next four years. Insurance firms are keen to exploit this potential; in keeping, ING is planning its entry in India.

The fact that these companies are focusing on micro insurance is crucial as traditionally insurance has never really expanded beyond urban geographies. This has been attributed to poor insurance literacy and awareness, high transaction costs, inadequate regulations, and inadequate understanding of client needs and expectations. According to the Centre for Insurance and Risk Management (CIRM)--which operates under IFMR Foundation-- the Centre and Insurance Regulatory & Development Authority (Irda) need make administrative and regulatory changes to enable penetration of micro insurance, especially in rural areas.

However, Rupalee Ruchismita, coordinator of CIRM, told FE, “The perception that entering rural markets is expensive has been replaced by the possibility of making rural insurance not only commercially viable and sustainable but also profitable. This is provided questions about product design and models of delivering risk hedging products are innovatively addressed.”

She admitted that India is the only country with micro insurance regulation. However, she noted that IRDA should allow more players in the sector. Ruchismita was speaking on the sidelines of a seminar on “Indian Microinsurance: What Works?” organised by Microfinance Insights, IFMR Foundation and CIRM.

She said that while the Micro Insurance Act stipulates an upfront payment of premium for micro insurance policies, people in rural areas have low incomes and are incapable of paying a lumpsum amount upfront. Therefore, allowing them to pay the premium in monthly installments will help in stimulating demand for insurance products, she added.

Ruchismita urged the centre to take administrative measures for promotion of micro insurance. She said that data must be made available to insurance companies so that they can expand their activities in rural areas.