Does Claim Settlement Ratio matter? Where can I get the latest report on IRDA claim settlement ratio of Insurance Companies for FY 2016-2017-2018? Latest IRDA claim settlement ratio for F.Y. 2015-2016 was released in December 2016. LIC again tops the chart with a claim settlement ratio of 98.33%. ICICI Prudential Life Insurance is one of the top amongst private life insurers, with a claim settlement ratio of 96.2% .
“The claim settlement ratio of LIC was better than that of the private life insurers,”
We often see the news regarding the Claim Settlement Ratio of insurance companies. Insurance Regulatory and Development Authority (IRDA), the Insurance Regulator will publish the details regarding this in its annual report. While it looks like a technical insurance term, it is in our own interest to know what it means for us.
What is Claim Settlement Ratio?
Claim Settlement Ratio is defined as the number of claims settled by the insurance company out of every 100 claims requests received by the company. If an insurance company received 100 claim requests in a year and the company settled 80 claims, the claim settlement ratio of the company is 80%.
Claim Settlement Ratio of Life Insurance Companies by IRDA – 2015-16
|Life Insurance Companies||Total no. of claims||Claims paid||Claim Settlement Ratio 2015-2016|
|Max Life Life Insurance||9175||8895||96.95%|
|ICICI Prudential Life||11034||10615||96.20%|
|HDFC Standard Life||12430||11811||95.02%|
|Canara HSBC OBC||571||531||92.99%|
|Bajaj Allianz Life||17967||16404||91.30%|
|Kotak Mahindra Old Mutual||2767||2465||89.09%|
|PNB Met Life||3094||2641||85.36%|
Steps to check
1. Please click on the below-mentioned link.
2. Download Annual Report published by IRDA.
Why private companies have low Claim Settlement Ratio?
In Life Insurance business, all the companies will have a low Claim Settlement Ratio in their initial years of operations. This is because of the applicability of Section 45 of the Insurance Act. Any claims reported in the first 3 years of the policy are called early claims and insurance companies will be carrying out a detailed investigation to ensure the genuine nature of such claims. If it is found that the policy holder has deliberately suppressed material facts at the time of taking the policy, such claims will be repudiated. But after the first 3 years, the claims are called as non early claims and they can not be rejected
Section 45 of the Insurance Act, 1938 – Indisputability Clause
New Clause-“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.
That means your claim can not be rejected by the life insurance company after 3 years of risk commencement, issuance of policy or revival of policy, whichever is later.
Will you go with LIC or with private companies?
It is upto you to select the Life Insurance company of your choice. But Claim Settlement Ratio alone should not be the criteria in deciding the company.
Let me explain with an example.
Mr. X has purchased a Term Policy of Rs. 50 Lakhs from a private company. This private company was not having a high Claim Settlement Ratio, as per the IRDA data. Since he is a diabetic, he disclosed his health condition. He has undergone the pre medical examination arranged by the insurance company and his premium was loaded by around 20% from the normal premium quoted earlier. Unfortunately, he died within 2 years of taking the policy. His nominee got the claim, because he had mentioned his health conditions correctly at the time of buying the policy. Had he not mentioned that, his nominee would have been denied the claim after a detailed claim investigation by the company.
Now, imagine another situation.
Mr. X has taken a policy from the company with the highest Claim Settlement Ratio. Here, he has not disclosed his diabetic condition. What will happen, if there is a claim in the first 3 years like above? Will his nominee receive the claim? No. This is because each claim will be investigated separately and will be decided on the merit of each case.
In case of claim after 3 years?
Such claims will be treated as non early claim and can not be rejected.
What you should do while buying a policy?
If you fill up all the correct information while buying the policy, you need not worry about the claim settlement ratio of the company. You have to read each question in the proposal form and answer it correctly to the best of your knowledge. There will be questions on your current health conditions, medication, family history of hereditary diseases, previous policies held by you etc. Habits like smoking and drinking also has to be disclosed. There can be a pre medical examination depending on the type of policy and its value. The insurance company will decide on each proposal based on the information given by you. If there is an adverse finding, the company will either charge a higher premium or reject the proposal.
Claim Settlement Ratio – Reason to Worry?
If you are honest and disclose all the information while buying the policy, there is no need for you to worry about the “claim settlement ratio“ of insurance companies. Normally, all insurance companies will honour the genuine claims.
Or, you can approach the appellate forums like Insurance Ombudsman and Consumer Court to get justice.