Khota Paisa

Public or Private Insurers?

Posted in Insurance by khotapaisa on December 4, 2009

I have got more than few mails/comments on this topic. Even I have often wondered earlier whether I should go for public insurance company (say LIC) or private ones. In theory, there is no difference. The same regulations applly to both and they are equally monitored by the concerned authorities. But then in the financial world, nothings is guaranteed to work just because there are rules. This question is more important when you go for pure insurance(term plan) which has no investment in it. So the performance of the plan is not a valid criteria for selection. To figure out an answer to this question, I downloaded some figures from IRDA site. Based on the data, I prepared these graphs. The first graph shows the ratio of annual expenses vs premium allocated. It doesn’t need rocket science to figure out the lesser the better for the company & the customers.


The follwoing graph shows the ratio of claims settled vs premium collected. So, the higher this ratio, better it is for policy buyers.
For obvoius reasons, I have not given the names of other insurers. But if you see the no. of bars (each representing one insurer) in the graphs, you will realise that it pretty much covers most of the insurers today.
Some of the differences between LIC & the rest can be explained in terms of size & age of the company. But that doesn’t make the point less valid. Also, most of the private insurers are making loss. They might start making profit in coming years, but there is no guarantee or strong sign of it.
The catch is that LIC charges more premium for the same sum insured. But then, I would say that it is better to pay a little extra if it gives you peaceful night.

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One Response

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  1. Basu said, on May 15, 2010 at 8:42 pm

    Yes, what you told is right. According to that only the premium is calculated. Hence LIC’s premium is more, but no worry at all.


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