Insurance Regulatory Development Authority (IRDA) has released its Annual report for 2014-2015 on 19th January, 2016. Based on the annual report I had listed down Top 10 Best best Life Insurance companies. The criteria for the selection is Claim Settlement Ratio 2014-15.
What is Claim Settlement Ratio w.r.t Life Insurance?
Claim settlement is one of the most important services that an insurance company can provide to its customers. Insurance companies have an obligation to settle claims promptly. For instance, if a life insurance company receives 1000 death claims and settles 950, the claim settlement ratio of that company would be 95%. We can also calculate Claim Settlement Ratio based on benefit/claim amount paid.
Based on IRDA’s annual report I have collated some important points as below;
Life Insurance : Benefits Paid in 2014-15
- The total amount of benefits paid by life industry was Rs 2,11,180.27 crore in 2014-15 (Rs 2,16,395.63 crore in 2013-14).
- The benefits paid by the private insurers stood at Rs 67,054.52 crore (Rs 58,380.09 crore in 2013-14) constituting 75.82 per cent of the premium underwritten (75.47 per cent in 2013-14).
- LIC paid benefits of Rs 1,44,125.75 crore in 2014-15, constituting 60.14 per cent of the premium underwritten (Rs 1,58,015.54 crore in 2013-14, 66.69 per cent of the premium underwritten).
- The benefits paid on account of surrenders / withdrawals stood at Rs 99700.76 crore, of which LIC accounted for Rs 46,537.61crore and private sector Rs 53,163.15 crore.
- In the current year, in case of LIC, out of the Rs 46,537.61 crore surrenders, ULIP policies accounted for Rs 23,224.49 crore (49.90 percent) as against Rs 38,967.66 crore (65.35 per cent) in 2013-14.
- In case of the private insurance industry, the ULIP surrenders accounted for Rs 48,657.89 crore (91.53 per cent) in 2014-15 as against Rs 44,541.11crore (94.18 per cent) in 2013-14.
Life Insurance : Death Claims paid in 2014-15
- In the year 2014-15, the life insurance companies had settled 8.51 lakh claims on individual policies, with a total payout of Rs 11,788.67 crore.
- The number of claims repudiated/rejected was 18,231 for an amount of Rs 701.69 crore.
Life Insurance Companies’ Death Claims Settlement Ratio 2014-15
- The claim settlement ratio of LIC was better than that of the private life insurers. Settlement ratio of LIC had increased to 98.19 percent during the year 2014-15 when compared to 98.14 percent during the previous year.
- The percentage of repudiations was 1.15 percent in 2014-15 remaining almost at the same level (1.10 percent) as of the previous year.
- For private insurers, settlement ratio had gone up by 1.09% at 89.40 percent during the financial year 2014-15 when compared to 88.31 percent during the previous year.
- The percentage of repudiations for private insurers was at 7.78% in 2014-15 against the 8.03% for 2013-14.
- The overall industry’s settlement ratio had slightly increased to 96.97 percent in 2014-15 from 96.75 percent in 2013-14.
How to read above IRDA Claim Settlement Ratio Table?
Let me explain on how to understand the numbers given in the above table. Let us consider Sl.No 1 which has data regarding LIC. During the period 2014-15 the total number of claims (no of policies) received by LIC of India are 7,55,901. This is inclusive of last period’s pending claims (if any) and this period’s (2014-15) claims that are booked or intimated.
7,42,243 policies out of total 7,55,901 policies were settled during the period 2014-15. This translates into a claim settlement ratio of 98.19% for LIC.
The total claimed amount (Benefit Amount) on LIC policies during 2014-15 was Rs 9,480 crore. Out of which Rs 9,055 crore worth of claims were settled.
As per the above explanation LIC gets 98.19/100. So, what happened to 1.81% (100-98.14%) of claims (no of policies)?
These claims fall under the category of claims repudiated or pending or written back. (Repudiated means Claim rejected. Pending are yet to be settled and Written back claims are ‘sent back for more information)
Top 10 Best Life Insurance Companies based on Claim Settlement Ratio 2014-15
- LIC : In 2013-14 LIC’s Claim settlement Ratio was 98.14%. This is slightly improved to 98.19% in 2014-15. LIC is the best life insurance company as per claim settlement ratio. LIC had the best Claim Settlement Ratio in 2013-14 too.
- Max Life Insurance
- Birla Sunlife Insurance
- TATA AIA Life Insurance company
- Star Union
- ICICI Prudential Life Insurance : ICICI Pru life’s claim ratio has fallen slightly from 94.10% to 93.80%.
- PNB MetLife
- Bajaj Allianz
- Kotak Life
- HDFC Standard Life : There has been a considerable fall in HDFC Life’s Claim Settlement Ration in 2014-15 when compared to 2013-14 data.
Important Points to ponder upon
- The claims settlement ratio does not talk about the type of policies i.e., whether the claims that were received are Term or endowment or money back plans.
- Before buying any type of plan, do look at the company’s Claim Settlement Ratio. But kindly note that Claim ratio is just one of the factors and not THE factor when buying a Life Insurance Policy.
- Though Claim Settlement record is one of the important factors while choosing your life insurance plan, it is advisable to go for only Term Insurance. You can opt for a Term plan based on the claim settlement record. The other deciding factors can be cost of premium, features, optional riders, quality of service and your comfort level with the Brand. (You may like reading : Top 7 Best Term Insurance Plans).
- Do not hide any facts while filling the proposal form. This will ensure that your claim (in any unfortunate event happens) is settled.
- As per the recent amendment to Section 45 of the Insurance Act, If your policy is 3 yrs old, no matter what happens, the life insurance company will not be able to deny the claims. So, your life insurance company has only 3 years in hand to reject the policy based on any mis-representation or mis-statement. Once 3 policy years are completed then the life insurance company has to settle the claims and can not reject them.
Most companies cite incomplete documentation or concealment of facts as a reason for rejecting claims. Hence, while buying a life insurance it is of utmost importance that you furnish accurate information and ensure that all paper work is into place. Give importance to claim settlements record and do not get swayed away by higher returns / tax benefits alone.
(Image courtesy of Stuart Miles at FreeDigitalPhotos.net) (Reference : IRDA Annual Report 2014-15)