IRDA (Insurance Regulatory Development Authority) has published Claim Settlement Ratio Report 2018-19 for the insurance companies. The report highlights important information about performance of all life insurance companies during year 2018-19. Based on IRDA report 2018-19, I have carried out analysis and shortlisted Best Life Insurance Company in India. The shortlisting of best life insurance company given here is purely based on claim settlement ratio 2018-19. Let’s look at details given in the IRDA 2018-19 annual report along with claim settlement ratio.
Claim Settlement Ratio
A claim settlement ratio (CSR) gives information about how many claim is settled by the insurance company against claim or death of the policy holder. The calculation of CSR is very easy. It is ratio of total number of claim settled against total number of claim received.
Claim Settlement Ratio = (Total claims approved and paid)/(Total claims received by the insurer)x100
The claim that are rejected or not processed by the insurance company is due to misinterpretation, fraud or pending decision by the insurance company. Claim settlement ratio, claim rejection ratio and claim pending ratio all are different.
Let’s try to understand this by an example. Suppose Life Insurance Company has received 2000 death claim between 1st April 2018 and 31st March 2019. Out of these claims company cleared 1870 claims by paying money to the nominee. The company has rejected 50 claims and 80 claims are pending for decision.
- Claim settlement Ratio = (1870/2000) x100 = 93.5%
- Claim rejection Ratio = (50/2000) x 100 = 2.5%
- Claim pending Ratio = (80/2000) x 100 = 4%
The claim settlement ratio is always expressed in terms of percentage. The CSR is important parameter to determine trustworthiness and reliability of the company. You should always before buying insurance product from the company. You can get information about CSR on the IRDA website annual report.
IRDA Claim Settlement Ratio 2018-19
IRDA claim settlement ratio 2018-19 for the period from 1st April 2018 to 31st March 2019 is given below.
- Green – CSR 96% to 100%
- Yellow – CSR 90% to 96%
- Red – Below 90%
From the above table, you must have noticed that out of 24 different life insurance company total 15 companies are in green with CSR of 96% and above, 7 companies are in yellow with settlement ratio in the range of 90% to 96%. 2 Companies are in red with a ratio below 90%.
Claim Rejection Amount of Life Insurance Companies 2018-19
In order to do further analysis I have checked claim rejection amount. LIC is topping the chart with rejection amount of 8.47 Cr. The Claim repudiated by LIC is 193.07 Cr. The second highest repudiated amount is by SBI Life. Followed by ICICI and HDFC.
Best Life Insurance Company for 2019 -2020
Top 10 Best Life Insurance Company for 2019 -2020 based on claim settlement ratio is give below.
- Tata AIA Life
- HDFC Life
- Max Life
- ICICI Pru Life
- LIC of India
- Reliance Nippon
- Kotak Life
- Bharti Axa Life
- Aditya Birla Sunlife
- Exide Life
- Tata AIA Life is top on the list as per claim settlement ratio. Claim settlement ratio of Tata AIA this year is 99.07%. Last year also Tata AIA was in top 10 list with CSR of 98%.
- LIC has settled highest number of claims with settlement amount of 13503.2 Cr. It is highest amount. Although CSR of LIC is 97.79% this year LIC is still popular and trustworthy brand. Last year LIC was on the second number with settlement ratio of 98.02%.
- The detail CSR does not give any information about product type and the return given by the product.
- This claim settlement ratio does not give insight about claim paid for types of insurance policies like term plan, endowment plan etc.
- You cannot rely entirely on Claim Settlement Ratio for the section of the Insurance company or Insurance product.
- Section 45 of Insurance act says that No policy of life insurance shall be called into question on any ground whatsoever after the expiry of three years from the date of the policy.
Point to remember before purchasing Insurance Policy
- One should buy Term plan (Pure life insurance policy) when it comes to buying an insurance.
- The claim settlement ratio is indication with respect to insurance company performance. However, it should not be the only criteria of the selection.
- Compare all insurance features and get complete information about insurance policy before taking purchase decision.
- Never see insurance as investment option. If possible avoid ULIP.
- Compare last few years CSR to get understanding about performance of the insurance company.
- In addition to claim settlement you should look at the claim rejection and amount of rejection.
- Do not allow any insurance agent to fill up the application form on your behalf.
- Do not hide anything. Disclose all relevant information in the policy document.
Hope details of IRDA claim settlement ratio will be useful to you. Do share your queries in the comment section.