Death Claim Settlement Ratio for Life Insurance for FY 2012-13

Life Insurance Claim Settlement Ratio for FY 2012-13

Life Insurance Claim Settlement Ratio for FY 2012-13

The IRDA annual report for FY 2012-13 is out and the death claim settlement ratio has improved slightly for LIC (Life Insurance Corporation) at 97.7% while it has deteriorated slightly for all Private Insurers combined at 88.6%. Overall it’s at the same level at 96.4%.

The table below compares the death claim settlement ratio:

Life Insurance Death Claim Settlement Ratio for FY 2012-13

Life Insurance Death Claim Settlement Ratio for FY 2012-13

Few Points to note:

  1. The average life insurance claim is for just Rs 1.17 lakhs. This is really sad as such low amount would not support most of the families after the demise of the main earner. To put things in perspective a daily wage laborer earns more than Rs 8,000 per month. So the average death claim is like annual salary of a daily wage earner. As this is average a lot of claims would be of even lower amount!
  2. The average amount for settled death claim is Rs 1.11 lakhs. This means that the higher value claims are not being settled as successfully as the lower value claims. This difference is higher for Private Insurers combined, as the average claimed amount is Rs 2.13 lakhs Vs Rs 1.89 lakh for the claims settled.
  3. LIC average claim settlement amount is just Rs 98,000 as compared to Rs 1.89 lakhs for private insurers. This is also a factor of LIC covering all strata of the society.
  4. LIC by far has the best death claim settlement record at 97.7% followed by ICICI Prudential (96.3%), HDFC Standard (95.8%), SBI Life (94.4%), Max Life (94.3%), Kotak Mahindra (92.0%). Rest all insurance companies have settlement ratio of less than 90%.
  5. The difference between average amount claimed and average amount settled is as high as 22% by some companies like Bharti AXA, Birla Sunlife, Reliance, ING Life, Kotak Mahindra. This can be due to either more fraudulent claims are coming with higher amount or companies rejecting higher claim amounts willfully! This might also mean Term Insurance which generally has higher death benefit have lower settlement ratio.
  6. The data does not tell the settlement divided by type of insurance like ULIP or Term Plan. Also I am not sure if payment of only Fund value (and not complete death benefit) is considered as settlement in this report.
  7. Life insurance companies have a very high rate of rejection in the ‘early claims’ – so if there is a claim made within 2 years of taking the policy, there is a far greater chance of it being rejected. So all the companies which have started operation in last five years would obviously have low settlement ratio.

You can read the previous Claim Settlement Ratio for Life Insurance Companies for FY 2011-12,  2010-11 and 2008-09.

9 thoughts on “Death Claim Settlement Ratio for Life Insurance for FY 2012-13

  1. Deeptesh Pandya says:

    Hi, Amit, could please get UPDATED CLAIM SETTLEMENT RATIOS, Truly u have done a great job, thanks

  2. […] laborer. As this is average a lot of claims would be of even lower amount! The good news is this amount has increased from last year which was Rs 1.17 […]

  3. […] the last post we had written about the Death Settlement Ratios of Life Insurance companies for FY 2012-13. In this post we check how much time it takes for different life insurance companies to settle a […]

  4. The report is bit skewed due to lack of details on the type of plans as the point 6 & 7 of your comment rightly indicates. In my experience, majority of people buying from LIC are not pure term plans whereas Religare (which I bought) only sells pure term plans. It is difficult to reject ULIP claims since there is guaranteed fund value irrespective of false information. So the report is like mixing apples and oranges and painting them in same color. The table should be taken with a pinch (or rather a bag!) of salt:)

    • Totally agree with you. The report hides more than it shows 🙂

      Religare has everything in its portfolio – ULIP, Term plan, etc. So it sells all but I agree that LIC mainly is agent based which are die hard fans of everything other than Term Plans; which also shows in the lower average amount for death claims amount!

      • You are right, I see that Religare has expanded its portfolio. Back in those days, they were known in the market only for their cheapest online term plan.

  5. Dhawal Sharma says:

    This is one of the best analysis of much-hyped “Claim Settlement Ratio” amongst various blogs…Very comprehensively done with detailed data…Great work sir…

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