Life insurers settle 97% of individual death claims in FY 2015-16

The claim settlement ratio of life insurance companies has remained unchanged last fiscal as compared to FY 2014-15. The claims arising out of death of the insured stood at 97% in FY 2015-16. Under group policies, claims settlements also stood at 97%, shows the 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 8.54 lakh claims on individual policies, with a total payout of Rs. 13,800 crore during FY 2015-16. However, insurers rejected 15,150 policies amounting to Rs.736 crore. The number of outstanding complaints were 6000 and the amount involved was Rs. 450 crore in the preceding fiscal.

As in the past, 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 91% and 95% in case of private insurers in FY 2015-16.

Though the private sector has shown a slight improvement in their claim settlement ratio compared to preceding fiscal, these insurers continue to reject more claims than LIC. Of the 1.14 lakh claims received by private insurers, they rejected 15% or 7655 claims. LIC received a much higher 7.62 lakh claims but rejected only 1% or 7500 claims.

One of the reasons behind this high rejection in private insurers can be due to early claims and frauds. “LIC has been around for decades which diminishes chances of getting early claim. However, most of the private players are just a decade old and must be having high a number of early claims. Also, due to anti-selection i.e. selling policies without proper due diligence, the claim settlement ratio of such companies don’t look healthy,” said a Mumbai based insurance broker.

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.

Among the private players, Aegon, Max Life, HDFC Standard, ICICI Prudential and Tata AIA topped the chart with settlement ratio of over 95% and above in individual death claims. This was followed by SBI Life, Bajaj Allainz, Canara HSBC OBC, Reliance and Future Generali with death claim settlement ratio of over 90% each in individual policies.

Of the 23 private insurance companies, 11 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 5.45 lakh along with 14,338 pending claims of previous year. The insurers had settled close to 5.28 lakh claims in FY 2015-16 or 97% claims.

Also, the data shows that insurers had only 1% of claims pending in FY 2015-16.

Claim settlement ratio of life insurers in FY 2015-16

Source: IRDAI