Insurance penetration in India is one of the lowest, at 3.69%, when compared with other developing countries. And a lot of it has to do with the fact that insurance plans require a bit of technical knowledge or the ability to understand basic insurance. While some potential customers might take the pain of trying to understand insurance and their details, others rely on experts to help them in the cause. This is where insurance advisors like you come into the picture.
Potential customers believe that insurance advisors will not only be able to help them find the right insurance plan but also aid them in understanding some basic terminologies and how insurance plans work. Thus, insurance advisors must take their time to explain technical details to their potential customers. But one must be careful with sharing technical information. It should be done in moderation, a bit too much information and a customer might feel overwhelmed and too little details might also hurt you.
As an insurance expert, it is your responsibility to explain certain terminologies to your customers, which usually go unnoticed or ignored. This will help you connect with your customers and help you create a bond with them. Here are some of the terms that you must explain to your potential customers.
- Sum Insured
Insurance products that usually work with the concept of indemnity, is where customers will come across the term Sum Insured. Indemnity is nothing but the compensation that one party must pay due to the loss incurred by another party. It mostly applies to non-life insurance products such as motor insurance or health insurance or home insurance. Indemnity is simply the compensation that an insurer must pay to the insured in the case of damage, loss or injury. If a policyholder buys a policy that has a sum insured of INR 5,00,000, then the insurer is liable to pay only that much. Any additional amount must be borne by the policyholder.
- Sum Assured
The term “sum assured” usually comes into the picture for life insurance products. It is a pre-determined amount that the insurer will pay to the policyholder or their nominees when the specific event takes place, for which the insured has bought the policy. For example, if a policyholder buys a term life insurance and the sum assured is INR 75,00,000, on his or her death, the insurer will pay INR 75,00,000 to the nominees without any questions asked.
- Incurred Claim Ratio
The term incurred claim ratio is relevant for general insurance and health insurance companies. The number signifies the number of claims that the insurer has paid out versus the total number of premiums that the insurer had received. For example, if an insurer paid INR 75 crore out of INR 100 crore that it received as premiums, the ICR would be 75%.
- Claim Settlement Ratio
The claim settlement ratio signifies the total number of cases that an insurer has settled versus the total number of claims that it had received in the first place. If an insurer settles 85 cases out of 100 claims request that it had received, the CSR would be 85%.
The major difference between the sum assured and the sum insured is that, the insurer is liable to pay the sum assured irrespective of the damage that a person incurs. However, sum insured compensates only up to the level of damages that a person has incurred.
And as far as incurred claim ratio and claim settlement ratios are concerned, a customer should look at engaging with an insurer with higher CSR. On the other hand, a higher ICR is also bad for doing business. This is where an insurance advisor can bring in their expertise and help customers choose the right plan.
Explaining these technical terms will help you gain the trust of your customers and make way for a healthy relationship. This ,in turn, would help your business in the long run.