IRDA Death Claim Settlement Ratio 2018-19 |Best and Worst Life Insurance Companies in India for the year 2020. IRDA has published all details on claim settlement performance of Life Insurance companies in India on 16th December 2019 in it’s Annual Report 2018-19. Let us have a detailed analysis to find out the best and worst companies in terms of Death Claim Settlement performance.
Death claim settlement in a prudent and speedy manner is one of the major duties of any life Insurance company. The claim settlement performance of an insurance company gives a fair idea of how much a company is trustworthy.
What is Claim Settlement Ratio?
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 a life insurer has a claims settlement ratio of 80 percent, it means that the insurer pays 80 out of every 100 claims received when the policyholder dies.
The claim settlement ratio can be calculated based on the number of policies or the benefit amount settled. Analysis of both these parameters is necessary to get an idea of the term assurance death claim settlement performance of the insurer.
Death Claim Settlement Ratio (Life Insurance) 2018 – 19
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. The ratios in terms of the number of policies as well as the benefit amount also have been provided.
In order to understand the chart better, I have color-coded the performance parameters in a combination of three colors – Green, Yellow, and Red.
To get a clear picture of the claim settlement performance of an insurer, both claim settlement, as well as claim rejection ratio, should be analyzed simultaneously.
Life Insurance Corporation of India (LIC) – the only public sector company –tops the chart in terms of lowest claim repudiation ratio with just 0.43% in terms of number and 1.43% in terms of the benefit amount. On the other hand, Shriram performed worst with 17.06 % of the claims getting rejected in terms of the benefit amount.
As far as the claim settlement ratio is concerned, Tata AIA and HDFC Life top the chart with 99.07 % and 99.04 % in terms of the number of policies but we can also see that the claim repudiation ratio in terms of benefit amount for these companies is 3.98% and 5.28%. This implies that big sum assured policies with larger claim amounts are getting repudiated more for these companies.
Claim Settlement vs Claim Rejection ratio
The claim rejection ratio is the ratio between ‘number/amount’ of the claims completely rejected by the company compared to the total ‘number/amount’ of claims. As we have seen, the claim settlement ratio gives an idea about the death claim settlement performance of the company.
But, unsettled claims include claim pending and rejected claims. Pending claims can be later settled or get rejected. So the ratio of settled claims cannot give you an accurate picture of the company.
On the other hand, the claim-rejection ratio gives a more accurate figure on the claim settlement performance of the company and is more reliable.
As per the chart shown above, the highest claim rejection was done by Shriram and India First. A claim rejection ratio of 17.06 % is really hard to digest.
Performance of LIC of India – Public Sector Company
LIC of India has a proven track record of best claim settlement performance compared to other companies in India. This year also the performance was exceptional.
The above info-gram shows that LIC is steadily improving on claim settlement performance year after year. LIC has deduced the claim rejection ratio from 1.71% in 2017-18 to 1.43% in 2018-19.
Performance of Private Sector
On considering the claim rejection ratio of private sector companies as a whole, the average claim rejection ratio is 7.03 % when considered on the benefit amount settled.
Some private companies have performed well in settling the claims but several companies like Shriram and India First showed poor performance and are pulling the average down.
Time to settle death claims
Time taken to settle the death claim is also an important parameter that has to be considered while judging the performance of insurance companies. In the absence of 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 claim by various insurance companies is provided in the chart given below.
You can see that HDFC life insurance is taking more than one year to settle 26.47 % of the claim. On the other hand, despite a large number of claims, LIC settled 82.81% of the death claim within a period of 6 months. Bharti AXA and ICICI prudential also performed well with faster claim settlements.
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.