02/10/2024
As a life insurance practitioner, I often get asked questions like:
❓What if the insurance company goes bankrupt?
❓Will my claims get paid?
❓How can I pay so little and get such a high sum assured? Is this real?
Today, I want to explain in general how insurance companies work to make sure they can always pay your claims:
1️⃣ Regulated by Bank Negara Malaysia (BNM): Insurance companies follow strict rules set by BNM. They must have enough money in reserves, keep a good balance, and manage risks well. BNM checks on them regularly to make sure they’re in good financial health.
2️⃣ Work with Reinsurers: Insurance companies don’t take on all the risk themselves. They share the risk with other companies (reinsurers). This helps when big claims happen, like in cases of disaster or large sums.
3️⃣ Statutory Deposits with BNM: Insurance companies are required to keep some money as a deposit with BNM. This adds an extra layer of security and ensures they can pay claims when needed.
4️⃣ Pooling and Spreading Risk: Insurance companies collect premiums from many people. This helps spread the cost of claims, so one large claim doesn’t hurt the company.
5️⃣ Careful Underwriting: Insurance companies carefully check each application. They set your premium based on how much risk they’re taking on, making sure they can cover future claims.
6️⃣ Investment: Insurance companies invest the premiums they collect. The returns from these investments help them stay financially strong and ready to pay claims.
7️⃣ Claims and Fraud Checks: They have strong claims processes and checks in place to avoid paying false claims. This keeps the system fair and sustainable.
8️⃣ Capital and Stress Tests: BNM also requires companies to keep enough reserves and to do regular stress tests. This shows they can handle tough situations and still pay claims.
Now you can see that these steps help insurance companies manage risks, stay strong, and always be ready to pay your claims.
It’s important to review your coverage regularly to ensure you’re well-protected.
If you have any questions or want to learn more, feel free to reach out!
Stay insured, stay protected.🙋🏻♀️🙋🏻♂️
