IRDA (Insurance Regulatory And Development Authority) has come out with its annual report on insurance for FY 2013-14. This report has a lot of information on Life and General Insurance like the total premium collected, settlement ratio, solvency ratio, Insurance penetration in India among other things.
We have published the Death Claim Settlement ratio every year. This is one of the most important criteria for selecting right Life Insurance for you and your loved ones. Death Claim Settlement ratio tells you how what percentage of claims related to death were settled by the respective insurance company.
The ratio has improved slightly for LIC (Life Insurance Corporation) at 98.1% while it has deteriorated slightly for all Private Insurers combined at 88.3%.
The table below compares the death claim settlement ratio:
Few Points to note:
- The average life insurance claim is for just Rs 1.35 lakhs. This is really sad as such low amount would not support most of the families after the demise of the main earner. To put things in perspective the minimum wage for unskilled labor in Delhi is Rs 8,632 per month (as of Nov 2014). So the average death claim is like 15 months salary of an unskilled laborer. As this is average a lot of claims would be of even lower amount! The good news is this amount has increased from last year which was Rs 1.17 lakhs.
- The average amount for settled death claim is Rs 1.27 lakhs. This means that the higher value claims are not being settled as successfully as the lower value claims. This difference is higher for Private Insurers combined, as the average claimed amount is Rs 2.44 lakhs Vs Rs 2.16 lakh for the claims settled.
- LIC average claim settlement amount is just Rs 1.14 lakhs as compared to Rs 2.16 lakhs for private insurers. This is also a factor of LIC covering all strata of the society.
- LIC by far has the best death claim settlement record at 98.1% followed by ICICI Prudential (94.1%), HDFC Standard (94.0%), Max Life (93.9%), Star Union Dai-Ichi (92.9%), Bajaj Allianz (91.3%), SBI Life (91.1%), Kotak Mahindra (90.7%).
- Last year only 6 companies had settlement rate of more than 90%. This year there are 11 companies with settlement rate of more than 90%.
- The difference between average amount claimed and average amount settled is as high as 18% by some companies like Exide Life, India First, ICICI Prudential, Shriram Life among others. This can be due to either more fraudulent claims are coming with higher amount or companies rejecting higher claim amounts willfully! This might also mean Term Insurance which generally has higher death benefit have lower settlement ratio.
- The data does not tell the settlement divided by type of insurance like ULIP or Term Plan. Also I am not sure if payment of only Fund value (and not complete death benefit) is considered as settlement in this report.
- Life insurance companies have a very high rate of rejection in the ‘early claims’ – so if there is a claim made within 2 years of taking the policy, there is a far greater chance of it being rejected. So all the companies Edelweiss Tokio, India First, Star Union Dai-ichi, Canara HSBC, DHFL Pramerica, Aegon Religare which have started operation in last five/six years would obviously have low settlement ratio.
You can read the previous Claim Settlement Ratio for Life Insurance Companies for FY 2012-13, FY 2011-12, 2010-11 and 2008-09.