It’s a sign of something good to happen because it’s still a promise that your growing loss will be reimbursed
It’s a sign of something good to happen because it’s still a promise that your growing loss will be reimbursed
Price hike is bad. It pricks you where it hurts the most. You have to rethink and rethink your life and plans.
However, when premium rates are increased, as is the case with many things in insurance, it is not exactly what it seems.
An increase in premium is a sign of something good because it is still a promise that your rising losses will be reimbursed.
rising claims
When insurance companies increase premium rates, they are catching up with rising claims. The way it works in the real world is rarely ahead of that race.
The number of claims can be high (such as during COVID-19 or a natural disaster), high value claims (increasing cost of health care or car repair or whatever) or a combination of both.
Price increases as well as unforeseen events can dislodge through the economics of insurance. Add to this the complexities of investment returns with falling interest rates and the stock markets tanking.
Higher claims also logically result in lower profit or loss for the insurer. It is in our own interest that the insurer has a sustainable and profitable business as he and his company have to stick around to pay our claims for a few decades even in the case of life insurance policies and annuities. If raising premiums is the insurance industry’s way of ensuring business continuity, then that’s a good thing for you.
Consider this. When your motor insurance renewal premium comes in the next few months. This will be higher because the third-party liability premium has been increased and reset to reflect the loss as part of the periodic review.
It is an insurance where the premium you pay is heavily weighted in your favor not only in terms of cost of a claim but also in terms of legal action.
worth the weight
The troublesome procedures involved in defending yourself in case of a motor accident will make you realize the insurance policy, and its premium, is worth its weight in gold.
There is also a bigger picture. Not only is it illegal to omit this insurance, but it reduces the mobility of third-party liability insurance.
Most vehicles on the road have no insurance (illegally) and still cause accidents that the industry partly pays for, but society pays more dearly for it shattering lives and families and no fixed There is no security.
Coming back to the knee-jerk reactions to insurance premium hikes, if you pass on your insurance renewal, whether health, motor, home, life or pension, you are writing yourself out of protection circles.
The problem you must solve is not that challenging. If you have a car with 1,000 and 1,500 cc engine capacity, your TP liability premium was ₹3,221 and will now be ₹3,416 on the next renewal.
noticeable difference
This difference of ₹195 is something you might not even have noticed. And the premium hike covers you for rising expenses, which you may face in case of loss. As I keep saying, the question you have to ask yourself while buying insurance is is the premium expensive or the claim?
(The author is a Business Journalist, specializing in Insurance and Corporate History)