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While you make hundreds of important decisions in life so that you meet your financial goals, there is one decision that can help resolve all your financial constraints or protect you and your family in the long run. However, not all life insurance companies are alike, as they have quite a few factors that differentiate them from each other, like their capability to settle claims if the situation ever arises, which is also known as the solvency ratio of the insurer.
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In this article, we will understand the meaning of solvency ratio and its importance before you purchase a life insurance plan from Axis Max Life Insurance.
Solvency Ratio of an insurance company is the measurement of its capability to meet its financial commitments and debt obligations. It provides people with an insight of the insurer’s cash flow and whether it is able to cater to the long-term and short-term liabilities of the company.
By understanding the solvency ratio of the insurer, a policyholder can assess the solvency margin of the insurer and be assured of its capital size in comparison to the risks/claims that the company has to settle. In simple words, when you trust an insurance company with a huge chunk of your earnings to pay as premium for your loved ones’ security, you must be certain about how stable the company is in terms of being able to settle the claims and pay your dependents/nominees the claim amount. Therefore, solvency ratio helps you understand the insurer’s ability to do so, in order for you to choose life insurance plans from an insurer with higher solvency ratio.
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The calculation of solvency ratio of an insurer is quite simple, and is derived from dividing the insurer’s operating income (post tax) by the insurer’s debt liabilities. The formula is mentioned below:
Solvency Ratio = (Net Income + Depreciation) divided by Liabilities
Higher solvency ratio means that the insurer is financially stable and can settle claims without hassle. Whereas, lower solvency ratio means that the insurer is at high risk of becoming insolvent.
It is important to check solvency ratio of Axis Max Life Insurance because of the below mentioned reasons:
An insurance company with a low solvency ratio would imply that they are incapable of settling the claims requested by their customers. Therefore, you must not prefer buying a life insurance plan from such a company and always seek the insurers with higher solvency ratio.
Trusting your money with an insurer that has a higher solvency ratio means that it is less likely for the claim amount to be settled late. Checking the solvency ratio is also necessary because being a policyholder, it is important that you make sure your family doesn’t face any trouble in receiving the amount that you intended to save for their future.
Solvency Ratio gives an insight of how well the insurer has maintained its financial stability, therefore, having enough to settle the claims of the customers.
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The solvency ratio of Axis Max Life Insurance for the financial year 2022-23 is 1.95. This indicates the ability of a company to settle its long-term liabilities. A higher solvency ratio signifies a company’s robust ability to meet its claim obligations. Max Life has a solvency ratio of 195%, more than the mandatory 150%. This indicates a strong and stable financial position of Max's life in the insurance industry.
The solvency ratio of Axis Max Life Insurance for 6 consecutive years is mentioned below:
| Financial Year | Solvency Ratio |
| 2017-18 | 2.86 |
| 2018-19 | 2.51 |
| 2019-20 | 2.19 |
| 2020-21 | 2.07 |
| 2021-22 | 2.04 |
| 2022-23 | 1.95 |
Over the past 5 years, Axis Max Life Insurance has been able to maintain their solvency ratio above 2, which means that they are reliable when it comes to claim settlement and can be trusted with the futures of your loved ones.
Below mentioned are a few things to consider before you buy a life insurance plan:
Always check the solvency ratio and claim settlement ratio of any insurer for 5 consecutive years before you buy a plan from them.
Keep in mind your future goals, annual income and health conditions before you buy any life insurance plan.
For any information or query that you may have, you can approach the customer care service for help.
Making sure that your loved ones are not in distress due to financial constraints is your responsibility. But at the same time, it is also important that you ensure that they receive the claim amount without hassle. Hence, solvency ratio is very important to be observed before you buy a life insurance plan from an insurer.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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