The majority of Life Insurance Companies nowadays luring the buyers based on the IRDA Life Insurance Claim Settlement Ratio. Let us see the IRDA Life Insurance Claim Settlement Ratio 2021 based on the Annual Report 2019-20.
What is the meaning of Claim Settlement Ratio?
Claim Settlement Ratio is the indicator of how much death claims Life Insurance Company settled in any financial year. It is calculated as the total number of claims received against the total number of claims settled. Let us say, Life Insurance Company received 100 claims and among those, it settled 98, then the claim settlement ratio is said to be 98%. The remaining 2% claims the Life Insurance Company rejected.
Based on this, we can easily assume how much customer friendly they are in dealing with death claims. However, I warn you that this claim settlement ratio is raw data.
It will not give you a clear picture of what types of products they settled. They may be Endowment plans, ULIPs or Term Insurance Plans. Hence, this is not the sole criterion in judging the performance of a life insurance company.
IRDA Life Insurance Claim Settlement Ratio 2021 – Annual Report 2019-20
Below is the IRDA Claim Settlement Ratio 2019-20 or up to 31st March, 2020. Few points to notice from this Annual Report are as below.
# Claim settlement ratio of LIC was at 96.69% as at March 31, 2020, when compared to 97.79% as at March 31, 2019. The proportion of repudiations has increased to 0.81% in 2019-20 compared to that of 0.43% in the previous year.
# For private insurers, the settlement ratio had increased to 97.18% during 2019-20 when compared to 96.64% during the previous year. The proportion of repudiations came down to 2.42% in the year 2019-20 when compared to that of 2.83% in the previous year.
# The industry’s settlement ratio declined to 96.76% in 2019-20 from 97.64% in 2018-19 and the repudiation ratio increased to 1.02% compared to that of 0.74% in 2018-19.
# Claims of Life Insurers is as per the below table.
# Death Claims of Life Insurers for FY 2019-20 can be classified as below.
You noticed that claim rejection is high in LIC along with uncliamed and claims pending ratio also.
# The below chart will show you the duration wise break up of pending claims of Life Insurers during FY 2019-20.
Note here that pending claims for less than 3 months is high for private insurers. However, it is high in the case of LIC for the 3-6 months period. I am not sure the reasons for such a huge delay from LIC.
# Let us now look into the complaints side. The highest complaints about mis-spelling are against the banks. Then comes the brokers. The break up is as below. BEWARE OF BANKERS!!
# Causes of Mis-Selling are listed as below:-
a. Incorrect explanation of product features and benefits by sales person sourcing the business.
b. Incorrect premium paying term and policy term is explained to policyholder especially in cases
where regular premium paying product is sold as single premium product.
c. Policy is sold to gullible prospects assuring Loan / Bonus / Medical Benefits/ Gold coins/Mobile Towers/other benefits upon purchase of insurance policy.
d. Tampering, forgery of proposal/ other related documents.
e. High attrition rate amongst Sales team
f. Pressure on the sales person to meet sales target.
g. Free look cancellation requests are rejected by sales personnel who are not authorized to take such decisions.
h. Splitting of policies wherein multiple policies are issued to the same proposer at the same time.
i. Life Insurance policies are sold only as Tax saving/ Investment plans.
j. Sales personnel lack proper knowledge /are inadequately trained, thereby recommending unsuitable products to prospects.
k. Improper/Incorrect financial needs assessment of Prospect is done while sourcing the policy by the sales personnel.
l. Charges under the policy and lock in period are not properly explained while sale of Unit Linked Insurance Policies.
m. Churning of policies.
n. Contact numbers updated on the proposals are tampered, which restricts the success of the pre-issuance verification calls.
o. Lack of awareness on insurance on the policyholder’s part thus being misled into buying the insurance policy.
p. Policyholders failing to cross-check details.
q. Financial Problems/incapacity of the policyholder to pay future premiums.
r. Bundling and making it conditional for availing bank services.
s. Sale without proper consent of customer t. Insurance is sold to clients who were not present in India at the time of sourcing along with premium being funded without customer consent through bank accounts held with the bank.
u. Instigation by employees, advisor, channel partners, others who are no longer sourcing new business for the insurer.
I am sharing these reasons mainly to make you aware of the ways mis-selling may happen in the Life Insurance space.
Let me share you now the IRDA Life Insurance Claim Settlement Ratio 2021.
You noticed that 20 out of 24 companies have a claim settlement ratio of more than 95%. As I pointed above, LIC’s claim settlement ratio reduced compared to private players.
Average Claim Settlement Amount of Life Insurance Companies in 2019-20
It is hard to find what type of products these insurers settled. Hence, I always try to look into the average claim settlement amount of these insurers. Even though it may not give us a clear picture, but a better indicator of the types of policies they settled.
If you look at this data, then you noticed that Aegon is a topper and Sahara with LIC is at lower. LIC’s average claim settlement amount is Rs.1,74,403. It means the majority of the claims are traditional plans.
Top 10 Best Life Insurance companies in India for 2021
Based on the IRDA Claim Settlement Ratio 2019-20, which are the Top and Best Life Insurance Company in 2021? I select only ten based on the above data. You may differ in my view and come up with a different set of ideas. But these are my choices.
- HDFC Standard Life
- ICICI Pru Life
- Max Life
- Tata AIA Life
- SBI Life
- Aditya Birla Sunlife
- Bajaj Allianz
- Bharti Axa
Few important points before jumping into selecting of Life Insurance Companies
# Claim Settlement Ratio is raw data
As I pointed above, the claim settlement ratio is just raw data. It will not give us the specific data. Hence, never rely on this single data alone while shortlisting the insurance company.
# Concentrate on Product rather than company
Choose the product which suits your requirement and premium affordability. Declare the facts properly. Never hide any material facts. If all these you do, then an insurance company will have to accept your claim. Never give a room of suspicious on you to reject the claim.
# Section 45 of Insurance Act will guard YOU
According to Section 45 of Insurance Act “No policy of life insurance shall be called in question on any ground whatsoever after the expiry of three years from the date of the policy, i.e. from the date of issuance of the policy or the date of commencement of risk or the date of revival of the policy or the date of the rider to the policy, whichever is later”.
It says a lot. Even if you shared wrong information or hid some material facts, then also it is purely life insurance Company’s responsibility to dig deep and find out faults WITHIN 3 YEARS ONLY. After 3 years, they cannot question. Note the period of 3 years, it is from the date of issuance of the policy, or the date of commencement of risk or the date of revival of the policy or the date of a rider to the policy, WHICHEVER IS LATER. So let us say if you took the policy today and after a few years, the policy lapsed due to non-payment of premium. However, you thought to renew it again and paid all dues. In such situation, this 3-year period starts from such revival date, but not from the original policy issued date.
Read the complete details about this IMPORTANT act of Life Insurance in my earlier post at “Term Insurance-Claim Settlement Ratio no more a big criteria”.
# Disclose the facts Properly
While buying Life Insurance products, you must fill the proposal form on your own. Never allow any agent or Life Insurance Company representative to fill it. Disclose the facts properly without hiding anything. This will really help you in a big way. Also, it will not give any room for insurers to reject your claim.
Do the things properly which are in your hand. Rest HOPE for the best.
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