MintWise has also published Claim Settlement Ratio for Term Insurance by IRDA : 2016-2017 which has the latest data.
IRDA has announced the Claim Settlement Ratio for 2015-2016 in Dec 2016. This is valid as most recent till Dec 2017, when the next year’s data will be published by the Regulator. If you are looking for a term insurance plan, you MUST know the IRDA Claim Settlement Ratio (CSR) before making the decision. At this point, we must tell you that in spite of the fact that overall CSR is NOT the best way to decide on your term insurance plan, you cannot ignore it because it is one of the best available indicators as of today.
Definition / Formula of Claim Settlement Ratio
Claim Settlement Ratio = Total Claims Approved (paid to nominees) divided by Total Claims Received by the Company.
So Claim Settlement Ratio (or IRDA claim ratio) is the total number of death claims approved by an insurance company, divided by the total no. of death claims received by the insurance company. It is generally measured for a period of one financial year. It is measured for all products of the company put together (not term insurance plans alone).
To explain this, if an insurance company received 1000 death claims between Apr 1, 2015 and Mar 31, 2016, out of which it
- paid 973 claims to the nominees of those dead,
- rejected 16 claims, and
- is yet to take a decision on the remaining (1000-973-16=) 11 claims,
then
- the claim settlement ratio (or claims acceptance ratio or claims ratio) of the insurance company = 973/1000 = 97.3%
- the claim repudiation ratio (or claims rejection ratio) of the company = 16/1000 = 1.6%
- the claim pending ratio of the company = 11/1000 = 1.1%
All claims ratios are measured in percentages. And thanks to standardization done by the IRDA, the Insurance Regulator of India, it’s that simple to measure and it is therefore a great idea to use Claim Settlement Ratio for Term Insurance buying. IRDAI publishes this information annually. Claim Settlement Ratio 2015-2016 is not yet announced by IRDAI. The latest one available is published in 2015, for the period 2015-2016. This will be valid till Dec 2016, when the next report will get released by IRDA. Claim Settlement Ratio or Claim Clearance Ratio has a simple formula. Claims Settlement Ratio is defined as the ratio of claims paid to nominees by the insurance company and total claims received from customers. The balance claims are either rejected for impersonation, misrepresentation, fraud, etc. or pending for decision by the life insurance companies.
Now, it’s time to dive into the numbers.
Claim Settlement Ratio 2015-2016 Announced by IRDA
Overall, the claim settlement ratio for the life insurance industry stands at 97%, but a lot of it is because of LIC’s large base with very high CSR. A lot of private life insurance companies are now ‘matching up’ since the last 4-5 years. However, like we mentioned in the disclaimers above, it may not be an equal comparison. Here’s all the information on CSR that you will need. Let us see which are the best insurance companies on claims ratio. The ranking is based on the size of the company (New Business Premium generated) so that you get that perspective as well.
Life Insurance
Company
|
Annual New
Business Premium
|
Total Value of
Claims Settled
|
Average Value
of Claim*
|
Claim
Settlement
Ratio **
|
Details
|
LIC | Rs. 2,64,975 crores | Rs. 9,690 crores | Rs. 1.30 lakhs | 98% | Details |
Max Life | Rs. 6,970 crores | Rs. 261 crores | Rs. 2.90 lakhs | 97% | Details |
Tata AIA Life | Rs. 1,731 crores | Rs. 87 crores | Rs. 2.70 lakhs | 97% | Details |
ICICI Prudential Life | Rs. 4,782 crores | Rs. 406 crores | Rs. 3.80 lakhs | 96% | Details |
Aegon Life | Rs. 336 crores | Rs. 40 crores | Rs. 7.90 lakhs | 95% | Details |
HDFC Life | Rs. 7,705 crores | Rs. 300 crores | Rs. 2.50 lakhs | 95% | Details |
Reliance Life | Rs. 3,070 crores | Rs. 220 crores | Rs. 1.60 lakhs | 94% | Details |
SBI Life | Rs. 8,930 crores | Rs. 390 crores | Rs. 2.60 lakhs | 93% | Details |
Canara HSBC Life | Rs. 734 crores | Rs. 30 crores | Rs. 5.70 lakhs | 93% | Details |
Bajaj Allianz Life | Rs. 4,166 crores | Rs. 352 crores | Rs. 2.10 lakhs | 91% | Details |
Sahara Life | Rs. 146 crores | Rs. 7 crores | Rs. 1.00 lakhs | 90% | Details |
Future Generali Life | Rs. 510 crores | Rs. 30 crores | Rs. 1.90 lakhs | 90% | Details |
Exide Life | Rs. 1,835 crores | Rs. 52 crores | Rs. 1.80 lakhs | 89% | Details |
Kotak Life | Rs. 2,674 crores | Rs. 94 crores | Rs. 3.80 lakhs | 89% | Details |
Birla Sunlife | Rs. 2,344 crores | Rs. 216 crores | Rs. 3.40 lakhs | 89% | Details |
PNB Metlife | Rs. 1,905 crores | Rs. 125 crores | Rs. 4.70 lakhs | 85% | Details |
Edelweiss Tokio Life | Rs. 251 crores | Rs. 14 crores | Rs. 11.80 lakhs | 85% | Details |
IDBI Federal Life | Rs. 950 crores | Rs. 43 crores | Rs. 4.70 lakhs | 85% | Details |
DHFL Pramerica | Rs. 858 crores | Rs. 14 crores | Rs. 3.00 lakhs | 84% | Details |
Aviva Life | Rs. 883 crores | Rs. 101 crores | Rs. 8.10 lakhs | 82% | Details |
Star Union Dai-ichi Life | Rs. 887 crores | Rs. 33 crores | Rs. 2.90 lakhs | 81% | Details |
Bharti Axa Life | Rs. 1,043 crores | Rs. 50 crores | Rs. 5.00 lakhs | 80% | Details |
IndiaFirst Life | Rs. 1,425 crores | Rs. 41 crores | Rs. 3.00 lakhs | 72% | Details |
Shriram Life | Rs. 964 crores | Rs. 42 crores | Rs. 2.80 lakhs | 60% | Details |
What should you look for in Comparison of Claims Ratios?
Based on the above data on Claims Ratio published in 2015, this is how you should interpret it.
- Claim Settlement Ratio higher than 85% is good. Of course, very high CSR (more than 90%) is welcome if the life insurance company is also offering you a great value product. e.g. LIC, Max Life, Tata AIA Life, ICICI Prulife, Aegon Life, HDFC Life, Reliance Life, SBI Life, Canara HSBC Life, Bajaj Allianz Life, Sahara Life and Future Generali Life.
- Notice the variance in average value of claim paid. Higher the sales of term insurance (as % of overall portfolio), higher is the average value of claim paid. Also, lower is the CSR if the companies are newer.
Some Disclaimers on Claims Ratio
While claim settlement ratio is recommended as worthy of consideration at the time of buying a term insurance plan, the ratio is only indicative and not 100% perfect for this purpose. The reasons for which we are saying this, are as follows.
- The ratio is for all life insurance products put together and not just term insurance plans. So claim settlement ratio works in favor of life insurance companies with large non-term product customer base since such customers had bought a life insurance policy mainly with the aim of getting returns rather than as a protection tool in case of death.
- Frauds committed by customers cannot be blamed on the life insurance company. In such cases, it is only correct on the company’s part to deny the claim. Over time, when you eliminate fraud, you settle claims for only genuine cases and this can bring down the premiums for customers. So chasing fraudulent claims is indeed in the interest of good customers, even if it is at the cost of claim settlement ratio going down.
- Most of the claim denials happen in the first 2 years after issuance of the insurance policy. In life insurance industry parlance, they are called ‘early claims’. Newer companies will have many more early claims as a % compared to older companies. Claim settlement ratio of newer life insurance companies can come down for this reason.
- Some insurance companies which aggressively sell term insurance plans investigate all the suspicious and most of the large value claims before payout. So they may end up discovering more fraud cases, rejecting them (obviously) but deteriorating their claims ratio. We need to keep this perspective in mind when we look at some of the smaller companies with lower claim settlement ratio.
Having said this, life insurance companies who have managed a high claim settlement ratio in 2015 have indeed done a fabulous job – no denying that.
Final Words on Claims Settlement Ratio when buying Term Insurance
In conclusion, you should definitely use Claim Settlement Ratio when buying a term insurance plan. In addition to that, if you buy a term plan online by filling the application form yourself, and if you declare everything honestly on the form as well as during the medical examination to the doctor, it will make sure that your chances of claim approval are very high indeed.
If you are looking to buy a Term Insurance Plan with a guarantee of getting the claim if required, these tips, can help.
It means that the total VALUE of the claims that were settled is 69.14% of the total VALUE of claims made.
Claims Ratio, in general, is expressed as a % of the customers whose claims have been settled, and not on value terms.
Hi, I had a look at the the IRDA annual report for year 2015-2016 to check the death claims for the respective insurance companies.
I am trying to understand the ‘Benefit amount’ that is listed along with ‘No. of policies’ under ‘claims paid’ column. In case of HDFC,it is 11811 policies (95.02%) with 300.19 Cr (69.14%), does this mean that HDFC has paid on 69.14% of the claim amount in am average?
Hi Sanjay, thanks for your query.
There are more dependencies that just age and gender. Such as smoking habit, the duration you are looking for, claims ratio, solvency margin, the riders you would need to add to make the plan comprehensive and of course the brand. All this is available at multiple price points as well. The best way to find out is to compare brands and narrow down your choices.
To do that, just click on this link below and proceed.
https://www.mintwise.com/term-insurance-compare
I am looking for a term plan and my age is 25. Kindly suggest me a best Term Plan
Perfect. Go ahead, Vamsee.
Thanks a lot, Sir! I also looked at LIC, HDFC, SBI, etc, though CSR is high, premium is also high. As per latest disclosed data, 92% is CSR for Bharathi AXA for 3 quarters for 2016-2017. I think with CI & ADB raiders, I can go with Bharathi AXA.
Your inputs are valuable!
Hi Vamsee, Claims Settlement Ratio published by IRDAI includes only death claims, not claims for Critical Illness rider. So the CSR of 80% is for death claims alone.
However, in our view a claim getting passed depends entirely on the buyer – if you declare everything truthfully and comprehensively, we do not see a reason why any company would deny the claim. If you are happy with the features of the plan you mentioned, please go ahead and buy it. If you would like to see further choice click on the link below and compare premiums to buy the most suited plan.
https://www.mintwise.com/term-insurance-compare
All the best, Vamsee.
I am looking for Bharathi AXA Term insurance plan. First premium is low, good critical illness cover, death cover will still continue in case of CI, Accidental cover is there. More importantly coverage is there till 85yrs, which no one gives(without CI). But settlement ratio is low approximately 80%. Should i still choose this? It may be low settlement ratio as more people falsely tried to get money for CI at early stage? Your inputs needed sir.
Thanks!
thank you
CSR is in fact the last thing to be checked. Firstly, Raviprasad, get your requirements right – what kind of term plan, whether you need riders (add-ons), etc. and what should be the level of cover and till when. Once you do that go with an insurer that offers that at a reasonable price and has a 80+ claims ratio. Choose a brand you are comfortable with – you are not likely to go wrong. Any person recommending a specific brand wouldn’t be doing so without reason.
Unfortunately, limited details are available in public domain at a reason level for claims. Perhaps that should not be published either. But one can guesstimate that this could be because of genuine reasons. It is not that insurers are keen to deny any genuine claim. They are keen to only deny genuine fraudulent cases, and that happens for the benefit of the good customers.
CSR being high or low is not important beyond a point. All you need to ensure is that your individual application is transparent and everything is indicated clearly. Getting medicals done is a plus, surely. As long as that is the case, no company will reject your claim in case there is one.
Hope you get the picture, Shailesh.
Any idea why claim settlement ratio for AVIVA is less, what could be the rejection reason, where can we get such information
Dipak, we do not recommend brands per se. We suggest that you do not think of a brand to start with. Get your requirements clear, what are you covering for, for how many years, what kind of claim amount is best, etc. and then choose a brand you are comfortable with. Do check the Claim Settlement Ratio before you finalize your term insurance plan.
Hi. Thanks for claims information. What is the best combination of csr and premium that is recommended by you for term insurance plan?