Nithin Kamath Highlights Growing Complexities in Life Insurance
Life insurance policies are becoming increasingly complex and difficult for consumers to understand, according to Nithin Kamath, founder and CEO of Zerodha. Kamath recently shared his observations on the challenges facing those seeking life insurance, highlighting stricter rules and a more rigorous evaluation process by insurance companies.
Kamath emphasized the importance of adequate life and health insurance as a foundational element of personal finance. “The first thing you should do when you are starting your personal finance journey is to ensure you have sufficient life and health insurance,” he posted on X. “If you have dependents, not having life insurance is a bad idea.”
However, Kamath noted that the complexity of life insurance policies often discourages potential customers. “Perhaps the biggest reason why they don’t have life insurance is because the policies are a nightmare to understand with all sorts of jargon and hidden clauses,” he added.
The Underwriting Process and Increased Scrutiny
In India, insurance companies employ a detailed evaluation process, known as underwriting, before approving a life insurance policy. This process involves a thorough assessment of an applicant’s health, lifestyle, occupation, and financial status. Insurers analyze these factors to determine the level of risk associated with providing coverage, which in turn affects premium amounts and eligibility.
Several factors are considered during underwriting, including age, medical history, smoking habits, family medical history, and income. However, the COVID-19 pandemic has led to increased claims and a reassessment of underwriting policies. This has resulted in a tightening of the approval process.
Challenges for Applicants
As a result of these changes, even minor health conditions that were often overlooked previously may now impact an applicant’s eligibility for life insurance. Additionally, many insurers have introduced longer waiting periods before certain claims can be processed, making it more difficult for policyholders to access benefits quickly.
Many individuals find insurance policies difficult to understand because they contain technical terms and often have complex conditions. Terms like riders, exclusions, and waiting periods can confuse customers, making it challenging to determine the exact scope of coverage. Furthermore, insurers frequently update their terms, adding to the confusion.
Tips for Securing Suitable Life Insurance
Financial experts recommend comparing different policies before making a decision to improve the chances of obtaining suitable life insurance. Comparing policies will enable the consumer to see the specific exclusions, waiting periods, and claim settlement ratios.
Experts also suggest that those looking for life insurance should strive to lead a healthy lifestyle, as this can improve the chances of approval, since insurers assess medical risks. Disclosing accurate medical information is also vital to avoid problems during claims.
