IRDA Death Claim Settlement Ratio 2019-20 analysis. Find the Best and Worst Life Insurance Companies in India. Insurance Regulatory and Development Authority of India(IRDA) has published its annual report for the year 2019-20 on 10th February 2021. Read a detailed analysis of the claim settlement performance of various companies based on this report and understand the best life insurance companies in India. This analysis can help you to make informed decisions in your next life insurance product purchase.
Why death claim settlement ratio is important?
Settlement of Death Claim in a prudent and speedy manner is the prime duty of any life insurance company. The claim settlement performance of an insurance company can give a clear indication of the trustworthiness of the company.
The death claim settlement ratio of an insurer is the percentage ratio between claims settled and claims received in the period of time. In other words, if the claim settlement ratio of a life insurer is 80% it means that the insurer pays 80 out of every 100 claims that occurred during the period. The claim settlement ratio can be calculated based on the number of policies or the benefit amount settled. Analysis of both these parameters is required to get a proper understanding of the claim settlement performance of an Insurance company.
Various types of claims – Insurance companies
Insurance companies settle different types of claims and death claim is just one among them. The various types of claims settled by insurance companies include maturity, surrender/withdrawal death claim, etc. Let us have look at the ratio of various claims settled by insurance companies in India.
Out of the total claims of 2,52,761 crores settled by LIC of India, only 7 % is the death claims and 60 % of the claim settlement is in the form of maturity. Whereas in the private sector, 13 % were death claims and 53 % of the total claim was in the form of surrender or withdrawal.
IRDA – Death Claim Settlement Ratio (Life Insurance) 2019-20
The Death Claim Settlement Ratio as well as the claim rejection/repudiation ratio of Indian Life Insurance Companies are provided in the table given below. The claim rejection ratio is the rate of the claim that was rejected or repudiated by the company in the given period. The ratios in terms of the number of policies as well as the benefit amount also have been provided.
I have provided color coding to the table so that you can understand how well each company performed in terms of claim settlement. Green is the best while red is the worst and yellow for medium performance.
Claim Settlement vs Claim Repudiation/Rejection Ratio
The claim rejection ratio is the ratio between the number/amount of claims completely rejected by the company, compared to the total number/amount of the claims.
One point you should remember is that unsettled claims includes ‘Claims Repudiated‘ and ‘Pending Claims‘. Pending claims may later get settled also. So claim settlement ratio alone cannot give a clear idea of the performance of the company. On the other hand, the claim repudiation ratio can give a better picture of the claim performance of the company.
Best three companies based on claim repudiation ratio are as follows…
|Rank||Insurance Company||Claim Repudiated (Number of Policies)||Claim Repudiated (Benefit Amount)|
|1||HDFC||0.43 %||3.62 %|
|2||AVIVA||1.36 %||1.16 %|
|3||LIC of India||0.81 %||1.50 %|
|4||Sahara||1.53 %||2.90 %|
|5||Bharati Axa||2.50 %||2.46 %|
HDFC toped with lowest claim repudiation ratio based on the number of policies but 3.62% of claims were repudiated when benefit amount is considered. This means claim performance was not so good in high sum assured policies. Aviva and the only public sector company, LIC of India has done well on both counts.
Worst performance was that of Edelweiss Tokio which repudiated almost one third of the claims in terms of benefit amount.
Aviva tops the chart with lowest claim rejection ratio of 1.16 % followed by LIC of India with 1.50% and Bharti Axa with 2.46%.
Performance of LIC of India- the one and only public sector company
LIC of India has a proven track record of best claim settlement performance compared to other insurance companies in India. This year also the performance was exceptional.
The above info-gram shows how the claim repudiation experience of LIC of India has changed over the last four years. LIC was steadily improving the claim repudiation ratio from 1.83 % in 2016-17 to 1.43 % in 2018-19. But in the last year (2019-20) the rate has slightly depleted to 1.5 %.
Death Claim Repudiation LIC Vs Private Companies
On considering the claim rejection ratio of private sector companies as a whole, the average claim rejection ratio for the year 2019-20 was 6.11%. Whereas LIC’s rejection ratio was just 1.5%. Many private sector insurance companies performed well this year but companies like Edelweiss Tokio pulled the ratio up.
Time to settle death claims – a comparison
Time taken to settle death claims is also an important parameter that has to be considered while judging the performance of insurance companies. In the unfortunate event resulting in the absence of the breadwinner of the family, earlier settlement of the claim can reduce the financial difficulties of the family to a large extent. Time taken to settle the pending death claims is provided in the chart given above. We can see that many companies could settle all the death claims within a time span of 3 months.
Poor performance of Kotak Mahindra and India First also can be understood from the chart.
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Anish L J is a ‘Financial Planner’ and member of Chartered Insurance Institute(CII), London and Insurance Institute of India. He is also a finance, insurance and software consultant. He thoroughly follows the developments in finance, insurance, and other related sectors.