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  • Claim Settlement Ratio for Life Insurance

    IRDA, the Insurance Regulator of India publishes the Claim Settlement Ratio for life Insurance buying each year. And this is valid till June 2016, when the next report is released. Claim Settlement Ratio is a ratio of claims paid to nominee by the insurance company and the total claims received from customers. The balance claims are rejected for impersonation, misrepresentation, fraud etc. or pending decision by the Life Insurance Companies.

    You must however be aware that the ratio is indicative and not 100% perfect. You must be aware of the following:

    • The ratio is for all the term insurance products and not just life insurance plans. So the ratio works in favour of life insurance companies with large non-term product customer base.

    • Frauds that have been committed by the customer cannot be blamed on the life insurance company.

    • Most of the claims are denied in the first 2 years after issuance of the insurance policy. This is called as early claims and newer companies will have more early claims when compared to older companies. The claim settlement ratio of the newer companies can come down because of the early claims.

    • Some companies aggressively sell their insurance plans and they will only investigate the clients when they have to make huge payouts and end up discovering frauds and eventually rejecting them. This in turn deteriorates the claims ratio.

    Claim Settlement Ratio of 2014-2015

    The overall claim settlement ratio for the life insurance industry stands at 97%. The ratio is mostly because of LICs large base a high Claim Settlement Ratio. The following is the complete information of the Claim Settlement Ratio:

    Claim Settlement Ratio of 2014-2015

    Insurer

    Death claims received

    Death claims paid

    Average value per claim paid

    Claim Settlement Ratio

    Claims that are pending (in %)

    Average days of pending claims

    Average claim settlement time

    LIC

    7,55,901

    7,42,243

    1,20,654

    98%

    0.5

    286

    26

    Bajaj Allianz

    20,661

    18,978

    1,83,291

    92%

    3.0

    46

    28

    Reliance Life

    18,142

    15,211

    1,50,726

    84%

    5.8

    160

    38

    SBI Life

    14,876

    13,303

    2,29,572

    89%

    3.2

    157

    22

    ICICI Prulife

    12,309

    11,546

    3,05,612

    94%

    0.8

    80

    20

    HDFC Std

    12,189

    11,031

    2,38,890

    91%

    2.3

    64

    25

    Max Life

    9,233

    8,804

    2,76,816

    96%

    0.1

    60

    26

    Birla Sunlife

    8,436

    8,055

    3,45,214

    96%

    1.7

    180

    29

    Tata AIA Life

    3,873

    3,659

    2,41,241

    95%

    1

    259

    30

    Exide Life

    3,432

    2,955

    2,03,519

    86%

    1.6

    77

    33

    Kotak Mahindra

    2,686

    2,437

    2,96,143

    91%

    3.2

    293

    28

    PNB Metlife

    2,466

    2,290

    4,48,821

    93%

    1.5

    65

    15

    Future Generali

    2,160

    1,808

    1,71,128

    84%

    1.8

    68

    50

    Shriram Life

    1,960

    1,307

    2,53,481

    67%

    11.2

    83

    172

    Aviva Life

    1,690

    1,396

    7,68,266

    83%

    0.5

    45

    26

    India First Life

    1,655

    1,195

    2,49,540

    72%

    5

    58

    46

    Star Union Daichi

    1,266

    1,191

    2,85,306

    94%

    0.3

    113

    19

    Bharti Axa Life

    1,112

    900

    3,94,667

    81%

    2.9

    46

    33

    IDBI Federal Life

    1,017

    736

    4,26,902

    72%

    4.3

    56

    33

    DHFL Pramerica

    953

    545

    2,74,128

    57%

    6.5

    154

    207

    Sahara Life

    778

    700

    91,143

    90%

    3.6

    77

    27

    Canara HSBC

    576

    516

    5,58,333

    90%

    3.1

    134

    57

    Aegon Religare

    460

    413

    7,44,068

    90%

    0.2

    45

    38

    Edelweiss Tokio

    119

    68

    10,64,706

    57%

    5

    60

    77

    Total

    8,77,940

    8,51,287

    1,37,338

    97%

    0.8

    206

    26

    How to Interpret the Above Data?

    The above data can be interpreted in the following ways:

    • The CSR higher than 80% is a good Claim Settlement Ratio. If a company of more than 90% CSR is offering a great value product, it is more than welcome.

    • Also look at Sthe Average claim settlement time taken but the company. This is a great indicator of the process efficiency of the company. Anything less than 30 days is good and anything less than 20 days is excellent.

    • The pending claims could be due to genuine reasons and do not read too much into it.

    • If the sale of life insurance is higher, the average value of the claim paid will also be higher.

    • Claim Settlement Ratio is lower for newer companies.

    Use the Claim Settlement Ratio is a last filter while buying a life insurance plan. If all the documents that you have submitted and if your claims made are genuine, then the small difference in the Claim Settlement Ratios can be ignored.

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