Why you should buy life insurance like the way you would buy gold
When purchasing gold, buyers are mindful of various factors. Similarly, to get a good return in exchange for money, one should adopt a similar approach to purchasing life cover.
For generations, gold has been one of the greatest sources of financial protection during uncertain times due to its ability to hedge against inflation and volatility in currency and equity markets. Life insurance too, much like gold, is a financial tool of last resort. It will stand with your loved ones in the most desperate of times. When it comes to financial planning, chances are the sheen of gold may dull a little, but a comprehensive life insurance policy will always be of considerable value to one’s portfolio.
When purchasing gold, buyers like you and I are mindful of various factors—cost per gram, level of purity, certification of quality and BIS hallmark. To ensure that we get the best return in exchange for our money, it is imperative to adopt a similar approach to purchasing life insurance. Here are some parameters that will help you shortlist a life insurance policy with as much precision as you show when buying gold.
1. Claims Paid Ratio: The ultimate hallmark of credibility
Just like hallmarks indicate the fineness of gold, claims paid ratios indicate the credibility of a life insurance company. Claims paid ratio shows the number of death claims settled by a life insurance company as a percentage of the total claims received over a particular period of time. For instance, if a life insurance company receives 1,000 death claims and settles 970, the claims paid ratio of the company will be 97%. The higher the claims paid ratio of a life insurance company, the greater are the chances of a claim being settled by it. It also reflects the quality of underwriting and sales processes adopted by the company. In general, the industry regards companies with higher claims paid ratio as relatively more efficient because it speaks volumes about the company’s degree of commitment to serving the customer.
2. Net Promoter Score: Level of customer centricity and reliability
Net promoter score is to life insurance what caratage is to gold. Just like caratage helps identify the degree of purity of gold, Net Promoter Score helps determine the overall degree of customer satisfaction by gauging how likely the customer is to recommend the life insurer’s products/ offerings to peers. In the life insurance industry, this metric is considered a cornerstone to assessing the overall performance of a company on customer parameters. One must take it into account when purchasing a policy as it is a comprehensive indicator of the kind of service a customer can expect from his/her life insurer.
3. Testimonials and customer reviews: Certification of quality
We often consider the jeweller’s validation of the quality of gold to ensure that we are purchasing only the best. Similarly, when buying a life insurance policy, it is pivotal to check the reviews provided by actual customers. This will enable you to steer clear of companies with bad online reviews and loads of unresolved consumer complaints. While some of the reviews might not be genuine, an overwhelming number of complaints should be a clear deterrent against choosing that particular insurer.
Lastly, while you can definitely tell a lot about the life insurer from its history of paying claims, net promoter score and testimonials, these shouldn’t be the only parameters to go by when buying a life insurance policy. Besides the above-mentioned metrics, you must consciously opt for a life insurance company that is on the top of the increasingly digital ecosystem, provides you ease of access to insurance solutions, reaches you on a medium and time of your preference and focuses on advocating the need for financial protection, among other things.
(The author is Deputy Managing Director, Max Life Insurance.)