Why Insure Cars when People Cause Accidents

The Nut behind the Wheel:

Automobiles do not cause accidents, drivers do. This is an elementary fact. I have yet to see a car run off by itself and kill people. Yet in India we insure the car. Anyone can drive it. Let me repeat that: an insurance company will pay for damages irrespective of who has driven the car - young, old, infirm, trained, or untrained - so long as he holds a valid licence. Does that sound strange?

True, no matter who is driving, a car can fail temporarily because of bad brakes or terrible weather or bad road conditions. In each of these cases is it not a fact that a more experienced driver stands a better chance at bringing the car safely to a halt?

India is not known for great driving quality. Licenses are issued to whoever has two legs and is not a chicken. Road discipline is sorely lacking both in pedestrians and drivers with each blaming the other and together blaming overcrowding. We all expect the policeman and the government to regulate traffic and road use. While the policeman does his best under the societal conditions we live in, the government is hesitant to raise fines because it will only serve to increase corruption. It is a universal truth that without strong deterrent action, societal behaviour cannot be changed, yet we are unable to implement such mechanisms for want of will and resources.

We can Change:

Driving in India is a risky business: pedestrians are either quick or dead and a driver is either quick or left behind. Education and training have not been able to change our dare devil approach to road safety norms. Financial penalties are either measly or just not enforced. However, there is a solution that can have a deep impact on driving habits and that is by creating a monetary disincentive for unsafe driving using motor insurance.

Motor insurance premiums currently do cover a combination of non-driving damage risks and driving-caused damage risks.  India must get around to charging insurance premiums by also including driver skills. Driving skill must get adequate weightage. Why is driving skill so important? A tree can fall on a car, or it can get stolen. These are non-driving related risks. It does make sense to classify a car based on its intrinsic value and determine premium for such non-driving risks. However a major portion of premium is towards “own damage”: used to cover driver caused damage. Driving skill has a major impact on “own damage” risk.

Most accidents are caused by inexperience, either due to young age or the fact that the license owner, while not young, may be new to driving. Our case is that insurance premiums must reflect this reality. This will mean that young drivers will pay a higher premium. Young drivers remain a major danger on the road, to themselves, their passengers and other road users, with study after study showing that young people are far more likely to be involved in a crash than older drivers. Inexperience, youthful bravado, sheer recklessness and alcohol can all play a part in these accidents. This kind of segregation will introduce caution, and in India this will be a boon because as of now issuance of a driver’s license actually means that the person can practice his driving on the road putting the lives of countless pedestrians at risk. The corollary is that experienced and safer drivers will pay less.  Each insurance policy on the car must be associated with a specifically identified driver or drivers. The driving license can be the unique identifier. Since no-claim-bonuses will be tagged to the named driver, each driver will be more careful in his driving habits. Consistently unsafe drivers will end up paying extremely high premiums or even become incapable of purchasing insurance, forcing change in their habits. Just as companies share claims experience amongst them, they can share driving characteristics amongst themselves to maintain authenticity of data.

Let us Do it:

There is no reason to exclude commercial vehicles from this philosophy. Why have we not moved to this regime is a question that needs to be asked. Reasons are partly historical and partly because insurance companies are loathe to change. We believe that giving an insignificant discount if an applicant is part of an automobile association is too cosmetic. Some companies ask for educational qualifications and offer some discounts. These efforts are too small and do not address the real issue of incompetent drivers. We believe that by moving to the new regime as suggested, motor insurance companies will also be fulfilling their social responsibilities.

Health Insurance Policy Explained - Part II

Health Insurance policies have different built-in features, features that vary from company to company and from product to product. Features are those elements that are in-built into a policy, while covers are additional elements one can opt for. As an analogy, let us say you are considering a phone with a built in camera and an option to add a memory card for external storage. The camera is the “feature” in the phone and the external card option is the “optional cover”.

Let us discuss some features in Health Insurance policies today. Some are useful and some are quite superfluous. The decision to select these features must be based on your life situation and your personal preferences.  

Policies that Pay/Permit/Arrange Health Checks: Periodic health checks are useful in today’s context. Insurance companies pay for these checks. These are usually part of the features within a policy. However most companies will require continuous insurance for at least 2/3 years before one can avail reimbursement for a health check-up. Amounts reimbursed can be much lesser than what you would normally incur, hence it is important to know limits. Certain companies specify the hospital where you can get this done, the number of members who can avail this feature, and the kind of tests that you are eligible for. If pre-arranged, this option is especially useful because no cash need be paid up front. We feel this is a useful feature to look for in your policy.

Policies that Allow a Non-TPA Discount: Most insurance companies have tied up with third party associates (TPAs) to help them process claims. It is obvious that a fee needs to be paid to them by the company. Thus if you opt to not use the TPA’s services, and deal with the insurance company directly, you can get a discount in the premium. We are divided in our opinion on this issue: you may save some time if you use the TPA, however the TPA does not do any function which you personally cannot execute.

Policies that Permit Optional Deductibles: Insurance companies are happy to insure clients that have a skin in the game. If you opt for a deductible, which are usually fixed amounts, the insurance company will reimburse claims for amounts over and above the fixed deductible. For example, let us say that you have opted for a fixed deductible of Rs. 10,000. If you have a claim for Rs. 12,000, the insurance company will pay you Rs. 2000 only. If your expenses in hospital were Rs. 8000, there will be no reimbursement from the insurance company. Deductibles can be per claim or per policy. Choose deductible plans wisely, depending on your life situation. Premiums can be significantly lower; however claims could see you going out-of-pocket.

In our next blog, we shall discuss “nice-to-have” covers.

You can find the best health insurance policies for you   at www.policylitmus.com.

Amit KumarHeart

All you need to know about Critical Illness Covers

A critical Illness is a life threatening disease that disables you from performing your normal occupation. Various studies have revealed that the incidence of Critical Illnesses have increased manifold. Reasons are many, and these include stress, a sedentary lifestyle, junk food, lack of physical exercise and so on. Nevertheless the fact is that along with the incidence rates, also increasing are the costs of treatment. It makes eminent sense to purchase a Critical Illness (CI) cover from an Insurance Company.

Which Illnesses are Critical:

In India, Critical Illness covers are sold as stand-alone policies by General Insurance companies and as add-on covers (riders) by Life Insurance companies. This means that if you wish to buy a CI cover from a life company, you must have an existing life policy with them.  Most companies (Life or General) cover at least the top 6 Critical Illnesses:

1.       First Heart Attack

2.       Stroke (Cardio Vascular Accident or CVA)

3.       Cancer

4.       Kidney Failure

5.       Major Organ Transplant

6.       Heart By-pass Surgery

Several companies cover more illnesses in varying numbers, even up to 12. They add Alzheimer’s, Burns, specific forms of cancer and so on. Premiums increase based on the number of illnesses covered. While you are the best judge for your requirements, our view is that the first 6 are enough.

Lump sum or Accelerated:

 CI covers are usually fixed benefit covers which means that they pay out a fixed amount on diagnosis, irrespective of the actual expenditure incurred. General Insurance companies follow the lump sum mechanism. However life companies tend to divide CI riders into 2 types:

Lump sum CI Rider: This is the normal mechanism, where on diagnosis, the fixed cover amount is paid out.

Accelerated CI Rider: Under this method, the fixed cover amount is paid out as above, however this amount is reduced from the total life cover on death or maturity.

For example:

Let us have a life policy of 100,000 life cover with a CI rider of 50,000.

·         On the diagnosis of a CI, if you have a lump sum rider, you will immediately be paid Rs 50000. The CI rider is extinguished, the policy continues as usual, and on death or maturity, 100000 will be paid out.

·         On the other hand, if you have an accelerated rider, you will immediately be paid Rs 50000. The CI rider is extinguished, the policy continues as usual, and on death or maturity, the balance 50,000 will be paid out.

It is obvious that Accelerated CI riders are cheaper.

Our View:

We prefer comprehensive coverage hence would advise buying a CI policy from a General Insurance Company or a lump sum CI rider from a Life Insurance Company.

To know which one is best for you, log onto www.policylitmus.com to find comparisons of over 1000+ products from 50 insurance companies.

Policylitmus

Myth of Saving Money in Insurance, Buying Online and using a Broker.

Every day we are inundated with emails and ads from various Insurance companies and Web Aggregator sites that promise to save us big money.  How true are these claims? Do you really save money and is buying online any cheaper than buying from an agent.

First things that one should know is that before an Insurer can sell a product in the market the insurer must file the product with the IRDA, the regulator. In the filling it must specify the pricing for the product. Once the pricing is approved the insurer must stick to that pricing formula. It cannot give a discount to one distributor over another.  For most products that are sold thru multiple channels like Direct from Insurer Online, Web Aggregators and offline distributors like agents and brokers, the price is the same irrespective of where you buy from.

What online comparison sites offer is a price and feature comparison between products of multiple companies. It helps you decide which product is best suited to you. But once you have decided on a product, then the price is the same no matter where you buy from. In this scenario where you buy from is more a matter of convenience and comfort. In cases where the comparison sites offer you a chance to buy polices instantly, you may want to opt for that as it is more convenient.

Are there any instances where you may still want to buy from a Distributor? The answer depends on your own comfort level with buying online. In case of life insurance policies you will need to submit documents for underwriting and may need to undergo a medical test.  If you are too busy to do these things on your own and follow up with the insurer, an agent or broker may be of help.  You don’t pay anything extra for taking their help and don’t save anything if you don’t.  One word of caution before you engage an agent. Make sure he/she is able to give you a choice of companies and products to choose from. Avoid people who always steer you to one product or refuse to give you a choice. Beginning of the year IRDA has allowed Brokers to start selling insurance online. We should start to see to brokers who supplement their physical sales force with online selling. Hopefully this will allow the customers to have best of both worlds.

Having said this there are a few products that are online only.  These are products can only be purchased Online either thru the Insurer directly or other Online distributors.  You cannot buy these products offline thru agents and brokers. Number of such products are growing and as the web sales catches up, you can expect more of such products.

Finally my advice to the customers is to compare insurance policies before buying.  Depending on your comfort level buy online or go thru broker. Better yet look for brokers who have online presence and buy from their site. Should you need manual assistance you can always call upon them for service.

Policylitmus

6 mistakes to avoid while buying Insurance

Buying insurance is NOT a mistake. It is important to insure, because it purchases peace of mind. Not having insurance is much like taking a family vacation in your car and not carrying a spare tyre. The mere possibility of a flat is enough to ruin your peace of mind. Millions buy insurance, and promptly forget about it: till a claim arises. Many thousands of claims are rejected because of the common mistakes made when buying insurance. Here are the six most common ones.

1.       Not enough research:  A lot of insurance is hard sell; sold and purchased hurriedly. This leaves little time to check the suitability or need. Motivated comparisons, wrong illustrations and untrained distributors add to the confusion. It makes sense to be sure of your need, and then do a little research on what are the best options available. Research the distributor’s competence, competitive products and the companies on offer. Compare Insurance policies before you decide to buy one.

2.       Too much or too little: Buying too much is rare. Most people end up buying too little. What is the appropriate amount of insurance one must have? In the case of property (say motor, or home) it is usually simply the current value of the asset. In case of life, a rule of thumb is ten times your annual income. Health Insurance is more complicated and a lot depends on your lifestyle and ability to pay premiums. Health premiums are eligible for a tax rebate. First check out what the premiums up to the current tax limit will buy for you, adjust thereafter based on your needs.

3.       Not reading the contract/documentation: This is so common as to almost be the rule. We rarely if ever open the document and read the conditions: even a cursory glance will reveal that the contract is written to protect the insurance company. Most insurance contracts have a cooling period; usually a couple of weeks. During this period you can return the contract for a full refund. Read your rights and also ensure that your obligations are met. Many a claim is rejected because some obligation on your side is not fulfilled to the letter.

4.       Inform your family about the details: Insurance protects you and your assets. It makes sense to inform your family about the details. There have been instances where claims have been rejected because of late intimations of loss.

5.       Read the application form and fill it out yourself: Insurance applications forms are complex and carefully worded. It is wise to tell the truth and if in doubt all the details. The more complete the answer the less the scope for a claim rejection. It has happened that the distributor may enter a wrong answer in spite of you wanting to be truthful, hence fill out the form yourself to avoid nasty surprises when filing for a claim.

6.       Not buying from a professional: Insurance agents are a dime a dozen and come in all shapes, sizes, and longevities. This profession has more than its fair share of dodgy, untrained fly-by-night operators. Buy from a professional who is sincere to his profession and cares about your needs.

Made any of these mistakes and suffered the consequences? Made a new mistake? Let us know and we shall share those as well. 

Amit Kumar

6 Steps to take if your life insurance company rejects your claim

Nothing can be more traumatic than an life Insurance claim getting rejected. Primary feelings are a sense of betrayal and helplessness.

But do not lose hope; here is what you can do.

1.       Know your Rights: These are an extract of your rights as a policyholder/claimant:

a.       After you submit a claim, the company shall raise requirements all at once and not in a piece-meal manner, within a period of 15 days of the receipt of the claim.

b.      A claim under a life policy shall be paid or be disputed giving all the relevant reasons, within 30 days from the date of receipt of all relevant papers and clarifications required. If the company requires an investigation, it shall initiate and complete such investigation not later than 6 months from the time of lodging the claim.

c.       Under certain circumstances, companies are liable to pay interest on delayed claim payments. 

It is possible that you may not have in your possession documents that the company insists on your producing. This could also be one reason that the company delays/denies claims. You must inform the company in clear terms that you do not have these documents and the reasons for the same.

2.       Check the date of commencement of the policy: Insurance companies cannot reject claims under policies that have completed more than 2 years from the date of commencement, unless they can prove fraud. It will help to read Sec 45 of the Insurance Act.

3.       Check the Proposal Form: A copy of the proposal/application for insurance is part of the policy document. Check if all information was correctly provided at the time of taking out the policy.

4.       Write to the company: If both of the above are in your favour, write a letter to the company asking for a review of the claim decision. Most companies have committees that review appeals from claimants. These committees generally comprise of senior staff and they tend to have a more “open” view. Make sure your application reaches this committee.

5.       File a complaint with the Ombudsman: If the value of your contract with the insurance company is Rs 20 lacs or less, you can approach the Ombudsman. The Ombudsman is a quasi-judicial body that hears appeals against an insurance company. This service is free and there is no need to appoint lawyers or other legal personnel. Ombudsman awards are binding on the Company.

6.       Approach the Consumer Court: A large number of decisions by consumer courts have helped aggrieved policyholders and claimants.

Of course the choice to approach a regular court always exists, and you may want to seek those remedies.

It is useful to also know the claim paying history of companies before you purchase a policy. Visit us to know more. If you still have a query, please contact us.

Amit Kumar

Why are so many people victims of Insurance misselling?

Blame yourself!

Almost everyone knows someone who has bought a policy and has regretted it. Sometime back I had conducted a quick, informal 5-question survey that threw up some interesting results.

Almost all of those who were surveyed, knew the person who had helped them purchase (usually their agent); most of them could remember the premium commitment they had made, somewhat lesser numbers were unaware of the details of the product they had purchased (those who scratched their heads and came up with vague replies like LIC or Money-back or ULIP were marked as people who could not remember details). A few cavaliers could not name the company they had purchased from (Customers of LIC were honorable exceptions when it came to remembering the company).

I summoned up the courage to ask them the final question: if they knew enough about payment schedules and bonus rates and fund apportionment and claim repudiation ratios. Replies were fairly colorful; suffice to say that the survey wound up at that spot.

We all know why we buy. I can say with a fair degree of certainty that it is almost always never for the right reason. Why is it that when we pay that first few thousands as premium we do not find out what we are getting into? If we buy for the wrong reasons and then cannot even remember what we bought, can we be called victims of misselling?

Think of the time you purchased your last smartphone, or television, or when you planned your family vacation. Remember how you had agonized over the choices, pored over the details, asked your friends, compared on the internet and generally made life hell for those around you? Now think of the time you plunked down the first premium for your insurance.

If you feel that this only applies to you, pause, you are in good company. Our inability to do a little research before we buy insurance is widespread in the population. Industry captains, smart entrepreneurs, government clerks, you name them, and they are in the list. It is obvious that an agent will spot this advantage and move in. Can you then blame him for selling you a dud? The fact is we cannot escape the responsibility of our own inaction.

This does not in any way condone the behavior of an agent who mis-informs and makes a sale. At our end, a little research, however, goes a long way. You can still oblige your tax advisor, or your friend, or save tax or whatever else is your reason for buying. But there is no reason for you to not make an informed decision on buying Insurance.

Amit Kumar

Who is a good Insurance Agent? (And where do I find him?)

Who is a good Insurance Agent? (And where do I find him?)

A good Insurance agent is difficult to find.

Hogwash! You may say. Every street and every office has more than one. At least everybody that you know and his uncle are Insurance Agents.

Check the list below and see if the chap you know (or heard of) meets the criteria to be a good Insurance agent.

□Pride in his Agency: There are three professions in the world which use the word “solicit” to source customers: Lawyers, you know who, and Insurance Agents. Don’t know about you, but my sympathies lie with the agent.

 He who presents his ID with a smile, and takes pride in his profession will stay with you longer and sell you the right stuff. A good agent will start his first interaction by sharing his own profile, his achievements and successes within the industry or his company, and how long he has been working.

Unfortunately, the ones that we often meet are the ones that will announce surreptitiously that he is (also) an agent. Stay away from them.

□Persistent but Never Pushy:  Most agents are persistent, some are obnoxious. A good agent is persistent, but never pushy and always polite. What is the difference? Good agents seek an appointment and time, so that they can be sure of explaining what they have to say. They believe that if a customer refuses to buy, it is because they have failed and not that the customer is an idiot. Somehow, they also seem to understand when a “no” is final.

 If your agent is fond of skipping details or is busy trying to shove a form under your nose for a signature, look again for someone else.

□Knowledgeable: A good agent’s starting point is to ascertain your needs and then attempts to find a product that will fulfill those needs. They know their company’s products and more than a little about the competition.

If your agent cannot name at least two competing products and why his product better fulfills your need, you can be sure he is in the wrong business. Ask for the product brochure and an illustration, so that you can verify at leisure. Agents who do not leave company literature may have something to hide.

□Rebate: Good insurance agents will be offended if you ask for a premium rebate, and may prefer to walk out if you insist on it.

If he does offer you a rebate, he is either not serious about his profession, or may compromise on service, later.

If you can tick all the four boxes for your agent, you are on to a professional and satisfying relationship.

Where do I find him?

You guessed right! Finding this paragon is not exactly easy, but they do exist. But that is a subject for our next blog!

We at policylitmus.com  provide the best Insurance comparison results for all types of insurance without needing you to give out any personal details.

Amit Kumar