This came up when I was trying to renew my Alto’s insurance online.
BHPian ravin93 recently shared this with other enthusiasts.
Hi,
I am about to renew my Alto car insurance online.
Generally, I go for Maruti Insurance broking so that I have a choice of Insurance companies to choose from.
The screenshot is attached.
It says Solvency rate and then there’s a number like 1.8, 2.3 and so on.
Net search points to a term called Solvency ratio but not Solvency Rate.
Does anyone have any idea what Solvency Rate is and which number is better?
Lower or Higher?
Here’s what BHPian SmartCat had to say on the matter:
Higher the better, but irrelevant.
The solvency ratio tells you about the ability of an insurance company to settle claims if the company receives a large number of claims all at once.
Eg: During Covid, health insurance companies were flooded with claims. With respect to car insurance, something like that will happen only in case of floods, earthquakes, wars etc.
The reason why it is mostly irrelevant is because IRDA would have set minimum limits. Also, there is something called REINSURANCE. Insurance companies would have themselves gone to a large company called “reinsurance company” and insured their entire portfolio. For this, the insurance company has to pay a premium (just like how we have to pay a premium)
So, if a car insurance company suddenly gets claims for Rs 100 crores because of a natural calamity, this reinsurance company will pay up a big percentage of the claim.
The largest reinsurance company in India is GICRE
Check out BHPian comments for more insights and information.
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.