Latest IRDA Claim Settlement Ratio 2022 was released on 22nd December 2021. Which is the best Life Insurance Company in 2022 (based on claim settlement ratio)? The majority of Life Insurance Companies nowadays lure buyers based on the IRDA Life Insurance Claim Settlement Ratio. However, is it the right data to look into?
What is the meaning of Claim Settlement Ratio?
Claim Settlement Ratio is the indicator of how many 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 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.
More than that we don’t know for what reasons the insurance company rejected the claims.
Latest IRDA Claim Settlement Ratio 2022
Below is the IRDA Claim Settlement Ratio 2020-21 or up to 31st March, 2021. Few points to notice from this Annual Report are as below.
# Claim settlement ratio of LIC was at 98.62%% as at March 31, 2021, when compared to 96.69% as at March 31, 2020. The proportion of repudiations has decreased to 0.1% in 2020-21 compared to that of 1.9% in the previous year.
# For private insurers, the settlement ratio had increased to 97.2% during 2020-21 when compared to 97.18% during the previous year. The proportion of repudiations came down to 2% in the year 2020-21 when compared to that of 2.5% in the previous year.
# The industry’s settlement ratio increased to 98.39% in 2020-21 from 96.76% in 2019-20 and the repudiation ratio decreased to 1.14% compared to that of 1.28% in 2019-20.
# Women comprise roughly 49% of the total population in India. However, policies issues on women stand for 33% of the total policies issued.
# Claims of Life Insurers is as per the below table.
# Death Claims of Life Insurers for FY 2020-21 can be classified as below.
You noticed that compared to last year, LIC improved it’s data for this year.
# Let us see the types of complaints insurers received during last year.
The interesting thing to notice is the majority of the complaints are related to policy service, unfair business, and survival claims. However, death claims-related complaints are just around 3%.
# Let us now look into the complaints side. The highest complaints about mis-selling 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 latest IRDA Claim Settlement Ratio 2022.
You noticed that 14 out of 25 companies have a claim settlement ratio of more than 98%.
Average Claim Settlement Amount of Life Insurance Companies in 2020-21
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.1,95,901. It means the majority of the claims are traditional plans.
Top 5 Best Life Insurance companies in India for 2022
Based on the IRDA Claim Settlement Ratio 2020-21, which are the Top and Best Life Insurance Company in 2022? I select only five 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
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 the 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 a 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.