Have to enrol your child in a good school? You go for the best private school available in the city - because the infrastructure would be better, with more options for the child's personality development and extracurricular activities. Need to get a surgery? You go for a private hospital - because you feel the treatment would be more state-of-the-art, and the facilities would be safe and hygienic.
We, consciously or unconsciously, prefer Private service providers over Government ones in education, healthcare, travel, etc. despite them being expensive. But when it comes to insurance, the story is entirely different.
The majority of people feel that PSU (Public Sector Undertaking) Insurers are more reliable and stable than their private counterparts. But is that true? Let’s find out!
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Public And Private Sector Insurance Companies - How Are They Different?
- Private insurance companies are those that are owned by private entities or funds, instead of the state or the federal government.
- Public sector insurance companies are those that are owned and funded by governments at the federal, state, or local level. They report to the Ministry of Finance. However, they are not welfare or non-profit companies. They function in a manner very similar to Private insurers - run autonomously, and ensure they remain profitable. Their policies have similar kinds of exclusions as well - that vary across insurers - apart from the standardised ones.
Contrary to popular belief, both PSUs and Private Insurers are equally reliable - as they run as per IRDAI regulations. The IRDAI acts as a check and ensures that all insurers are wise and just, and protect policyholders’ money as their own money. IRDAI keeps a tight check on the financial status of insurance companies through reports received by them, and takes necessary action when there are issues reported, especially with regards to ratios like Solvency ratio that measure long term financial viability.
Solvency Ratio reflects an insurance company’s ability to pay claims. Insurers are required to maintain a minimum 150% Solvency Ratio as per IRDAI regulations.
That said, they both have their unique attributes. While there is no one ‘best’ policy, there are certain areas where the private insurers work better than their public counterparts, and vice versa.
Private Or Public Insurers - Who Offers Better Products?
When it comes to innovation, private sector companies are generally far ahead. Since they are run as private businesses, they are able to keep consumer needs in mind, they learn to innovate and make new products and features constantly. Also, some Private insurers are partnered with multinational insurance businesses, hence, they bring global learnings and innovations to our country.
Given the past track record, Public sector insurance companies usually take more time to adjust to the market, and introduce new features and products. They usually take more time to become up-to-date to their private counterparts and their products.
Private Or Public Insurers - Who Offers Better Customer Service?
The services at private sectors are usually centralised. Everything is system-driven, and that can move processes efficiently, but also become very rigid at times. The system will not allow changes that could otherwise be made manually.
Government insurance companies, on the other hand, are decentralised. This means every branch office has its own way of operating. The service largely depends upon the branch manager you or your agents are interacting with. Since the services are human-dependent - if you are lucky, the interactions can become warmer than the process driven private insurance companies. However, since this is entirely dependent on the person who manages your case, there is no assurance of a more human, warmer customer experience as compared to private players.
Private Or Public Insurers - Who Offers a Better Claims Experience?
Most private sectors want to control their profitability and hence, many settle claims themselves. Private insurers, with all of its underlying teams, operate as one single unit. As a result, they do tend to offer better services and a better claims experience.
Most government insurance companies operate through external parties called TPAs. For instance, they operate through external surveyors for Vehicle Insurance and TPA (Third-Party Administrator) for health insurance. The experience can get disconnected or unsatisfactory due to additional parties in the loop.
Private Or Public - Where Should You Buy An Insurance Policy From?
In the insurance sector, both private and government-owned companies work similarly - because both have the same goals and aim to make good profits. The choice comes down to your personal preferences.
If you are someone who believes that government companies will be more fair and human, and can be trusted more because of government backing then probably buying the policy from a public insurance company may make sense. However, if you prefer system-driven, faster, and more efficient services, private companies after enough diligence and proper reference checks may be your best choice.
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Insurance is probably the only product where one pays many years ahead of the actual service consumption, i.e., claims. So it’s natural to be anxious about our insurer’s longevity and ability to pay claims when the need arises. As we saw, there is no one ‘perfect’ policy. Both PSUs and Private insurers have their own pros and cons - but they are equally reliable. We hope this article gives you a better clarity, and helps you choose a policy that fits you perfectly.