Online Term Insurance-How you are choosing Insurance Company?

When someone decide to purchase online term plan with little bit of search and gyan, first thing what they look for is claim settlement ratio of insurer. But do you think that ratio only matters?

Yesterday Finance Minister informed to Rajya Sabha about the number of complaints registered against insurer for unfair business practice during the period of 2012-13.  Below is the list of top achievers 🙂

1) HDFC Standard Life-33,813

2) Bajaj Allianz-21,745

3) Birla Sun Life-21,651

4) ICICI Prudential Life-16,891

5) Reliance Life-16,401

Compare to these complaints, LIC numbers were far less (2,538). Meaning of unfair business practices according to ministry is, selling policies by making false lucrative offers at the point of sale. So do you believe they will be loyal to you throughout the policy period?? Start thinking 🙂

Now few may think that I am canvasing for LIC, no I am not. Because usually few people select LIC for it’s claim settlement ratio. But see the below myth of that calculation too.

A valid point what I found from Subramoney is, even claim settlement ratio will also actually showing you the wrong picture. Suppose an existing insurance company settled 9 claims in a year and repudiated 1 claim, but if total SA of all settled claims is around Rs.45,00,000 still it shows 90% claim settlement. Whereas a newly established insurance company settled Rs.1,00,00,000 SA of one claim application and rejected 1 from the received total 2 applications, shows 50% claim settlement. But in reality small company paid more than existing to it’s clients. So need of the hour is change in IRDA data to show the clear picture about health and quality of insurance company.

Lot of term insurance seekers thought to go safe by taking LIC’s offline term plans. Reason for that is LIC’s highest claim settlement ratio. But in my view majority of LIC’s settlement will be for traditional plans not for term plans. Because till day, LIC’s strength is it’s agent force and traditional plans, which it does not want to alter by offering online term plans. So with lack of data about what type of plans settled and how much sum assured LIC settled, it is not wise to blindly go with LIC brand.

Learning is, before going with price comparison, claim settlement ratio and company service, first understand the product fully, make knowledgeable yourself and your family (because after your death your family need to go to insurance company for claim settlement) and finally honestly declare the materiel facts which your insurance company ask for. Rest will be in “God’s Hand” 🙂


19 Responses


  2. Be honest with your personal details and disclosers, and have faith in IRDA. If you disclose each and every detail and medically examine yourself and last but not least no FOUL PLAY from your side, how can an insurer deny your claim successfully. An insurer can deny your claim if one of the above facts is missing in your portfolio. What do you say about my belief. Please reply.


    1. Ajit-They are saying since 2 yrs that they will launch. But not sure when, even I think that they will not. Hope you opt for other insurers of your choice.

      1. can you suggest us any insurer who can give us a group insurance policy for 8-10 people with a cove of 1cr each

        1. Ajit-Their are so many players who provide group insurance. So you may contact according to your comfort with respective insurer. Naming one or two is not worthy.

  4. LIC has market share of more than 80%, the number of complaints are very very less! Let this be a nice lesson for those who are looking for cheap policy from private players, kudos basu for this wonderful eye-opener article!

  5. I disagree with your reasoning as well as Subra’s (my comments are there).
    The scenario both of you suggest is unlikely.
    If you look at the claim settlement table and determine

    SA settled per claim for (1) Total no of claims, (2) No settled, (3)No repudiated

    the 3 ratios are quite close to each for LIC. Whereas the ratio determined with
    no of claims repudiated is much higher for privates.

    This means that higher the SA, higher the scrutiny. If it is a early claim then the chances of repudiation is much much higher.

    Since LIC has a much higher rural reach obviously the typical sum assured settled will be less. So nothing for or against to say wrt LIC.

    However I refuse to assume that most of the privates sell higher no of term plans than LIC. Claim settlement ratio in the present form is useless only if this is true.

    Since there is not concrete evidence of this, all we can assume from the table is higher the SA, higher the scrutiny. Higher the chance of repudiation.

    I understand the point about young companies. But why should I care about them?
    Speaking in general:
    It is my families protection. So I choose to get it from an insurer who has been around for at least 10 yrs or so (not necessarily from LIC).

    Do correct me if I am wrong in my understanding.

    1. Pattu-Here I am not saying LIC data or private insurer data are wrong when it comes to claim settlement ratio. But what I am pointing is, if IRDA provided the in depth analysis about insurers health (in terms of SA, type of policies they settled and majority reasons for rejection) then we as a customer can be in a better position to judge.

      It is usual practice among folk who are eager to buy online term plans that their major selection process involves price and claim settlement ratio. What I am pointing is, with mere two data we can’t judge which is best insurer to go for. But lacking in data from IRDA also limiting them.

      1. I fully agree with that. My point is even with the existing data a person can choose among private players (leaving LIC out for above mentioned reasons) in a rough way:
        Look at the SA per claims repudiated and look at the duration in which claims have been repudiated,.

        Choose an insurer who is at least 10 years old,
        has lowest SA per claim repudiated and
        lowest no of early claims repudiated.

        This can be used for some measure of comfort. Comfort only as these numbers can be influenced by other factors.

        Unfortunately this kind analysis show one thing: Probability of hassle free early claim settlement is much higher with LIC than privates! Let give the benefit of doubt to privates reg. late claims and assume the probability is same for all.

        If IRDA does as you suggest that it will be a big help.

        Even though it is not perfect, this kind of comfort is needed because
        If someone tells me: “fill your form correctly and be honest. Then it doesn’t matter who the insurer is” I will accept.
        if someone tell me: “All claims repudiated are cases of falsification and fraud” I will certainly not agree. The Ombudsman can then pack up and go home.

        1. Pattu-Agreed and from above discussion we may point that “more data more confusion” 🙂 what you say?

          1. When IRDA reports were not available online then public could not use it for decision making. Not that they are online they should re-access how to report. Statistics if reported the right way will not confuse people.

              1. 1-“Yes that is what I said, IRDA need to think on this aspect.” you mean IRDA is not working/ thinking properly?
                2- “more data more confusion” – do u think that IRDA or any one should give his report on very less data base ?

                OR any one create his blog and post as per his thinking, even that will against LIC , IRDA or any other

                1. mdubey2007-1) If IRDA is so active then I think the word “mis-selling” is out of the insurance industry.
                  2) Please look at the above conversation between me and Pattu…you will understand in what context I said. If I am commenting anything against LIC or IRDA and that is wrong then request you to please validate the point where I am wrong. I will accept it with whole hearted in a positive note 🙂

Leave a Reply

Your email address will not be published. Required fields are marked *

For Unbiased Advice Subscribe to our Fixed Fee Only Financial Planning Service

Recent Posts