In terms of the duration of settlement of claims arising out of death, private insurance companies have outpaced LIC. IRDAI data shows that private insurers settled 76% of individual policies in less than three months as compared to only 19% by the public sector giant LIC last fiscal.
Overall, the insurance industry has settled close to 47% individual death claims in less than three months in FY 2014-15. While private insurers settled 74% of individual death claims in FY 2013-14, LIC settled only 17% of such claims.
Claim settlement ratio
The claim settlement ratio of life insurance companies has remained unchanged last fiscal as compared to FY 2013-14. The claims arising out of death of the insured stood at 97% in FY 2014-15. Under group policies, such claims settlements stood at 97%, shows an annual report released by IRDAI.
Claim settlement ratio is the number of claims settled to the total number of claims registered in a financial year. There are two types of claims – claims arising out of death i.e. death claims and claims settlement on maturity of policies like endowment policies, ULIPs etc. Typically, policyholders don’t face any problem with regard to claim settlement for the latter. In case of claims arising out of death, death claim settlement record of the company indicates the likelihood of an insurer to make good the losses.
In its annual report, IRDAI stated that life insurance companies had settled a total of 8.80 lakh claims on individual policies, with a total payout of Rs.13,000 crore during FY 2014-15. However, insurers rejected 18,231 policies amounting to Rs.702 crore. The number of outstanding complaints was 8,500 and the amount involved was Rs.450 crore in the preceding fiscal.
Claim settlement ratio FY 2014-15
|
Insurance Companies |
Individual death claim settlement ratio in % |
Group death claim settlement ratio in % |
|
LIC |
98 |
100 |
|
ICICI Prudential |
94 |
99 |
|
SBI |
89 |
96 |
|
HDFC |
91 |
99 |
|
Bajaj Allianz |
92 |
98 |
|
Birla Sun Life |
95 |
100 |
|
Max Life |
96 |
99 |
|
Reliance Life |
84 |
100 |
|
Tata AIA |
95 |
92 |
|
Kotak Mahindra |
91 |
99 |
|
Private total |
89 |
91 |
|
Industry total |
97 |
96 |
Source: IRDAI
Like every year, individual death claim settlement ratio of LIC was higher than the private life insurers. LIC’s death claim settlement ratio stood at 98% and 100% respectively in individual and group policies as compared to 89% and 91% in case of private insurers in FY 2014-15.
Among the private players, Max Life, Birla Sun Life and Tata AIA topped the chart with settlement ratio of over 95% and above in individual death claims. This was followed by ICICI Prudential, Bajaj Allainz and HDFC with death claim settlement ratio of over 90% each in individual policies.
Of the 23 private insurance companies, ten have crossed 90% mark in claim settlement ratio of individual policies. However, in group category, most private companies fared better.
In group policies, IRDAI data shows that the total claims received this year were 4.67 lakh along with 14,160 pending claims of previous year. The insurers had settled close to 4.50 lakh claims in FY 2014-15 or 96% claims.
Claims repudiation
While private insurance firms rejected close to 8% claims in FY 2014-15, LIC had repudiated only 1% in FY 2014-15 of individual death claims. Insurers like DHFL Pramerica, Edelweiss Tokio, IDBI Federal India First and Shriram have repudiated over 20% of individual death claims. Since these companies are relatively new entrants, it is possible that they have received large number of early claims. Early claims are those which arise within three years from the date of issuance of policies. Insurance companies closely scrutinize such policies to see if they are fraudulent.
Also, the data shows that private insurers had 3% of claims pending in FY 2014-15 against less than 1% of LIC.