Thread by @joinditto

What if your insurance company goes bankrupt?

Thread.👇(1/7)

You’re a diligent policyholder. You make timely premium payments. So, if the need arises, you’ll obviously expect your insurance company to meet your claims in full.

But, one question looms over you: will my claims be thrown under the bus if my insurer goes under? (2/7)

The answer’s no. Tell you why.

See, it’s not like someone decides to start an insurance company today, & it materializes tomorrow. There are strict regulations at play here.
(3/7)

India’s insurance regulator (IRDAI) only allows the financially strong to procure the license to start/acquire an insurance company. The minimum paid-up capital for launch is ₹100 crores.(4/7)

And, post-starting business, insurers have to maintain a solvency margin (assets>liabilities) of 150% or more.

Insurers also need to keep 50% more reserves than the liability value, to meet claims even during liquidity crunches. (5/7)

Besides, there’s safety in the form of ‘reinsurance’ or insurance for the insurer.

Despite these safeguards, say there’s some mismanagement & the insurer goes bust. Now what?
(6/7)

Fret not. The IRDAI will spring to action & merge the bankrupt insurer with another insurer, or use other means to ensure policyholders don’t become collateral damage.

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