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? The latest IRDA Claim Settlement Ratio for FY 2016-2017 was released in January 2018. LIC again tops the chart with a Claim Settlement Ratio of 98.31%. Max Life Insurance is one of the top amongst private life insurers, with a Claim Settlement Ratio of 97.81%.
“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 – Meaning?
Claim Settlement Ratio is defined as the number of claims settled by the Insurance Company out of every 100 claims’ request received by the company. If an Insurance Company received 100 claims’ request in a year and the company settled 80 claims, the Claim Settlement Ratio of the company is 80%.
If an Insurance Company received 100 claims’ request in a year and the company rejected 20 claims, then the Claim Rejection Ratio of the company is 80%.
IRDA divides its Claim Settlement Ratio in 3 parts
- Settled = Claims Settled/Total No. of Claims Reported* 100
- Rejected = Claims Rejected/Total No. of Claims Reported* 100
- Pending = Claims Pending/Total No. of Claims Reported* 100
IRDA Claim Settlement Ratio 2016-17 – Term Insurance
- Claim Settlement Ratio is calculated for Death Claims only
- Maturity Claims are not included in Claim Settlement Ratio
- It includes all products of Life Insurance Company whether it is a Term Plan, Endowment Plan or ULIP
- IRDA does not publish Claim Settlement Ratio of Term Plan separately
Claim Settlement Ratio of Life Insurance Companies by IRDA – 2016-17
| Life Insurance Companies | Total No. of Claims | Claims Paid | IRDA Claim Settlement Ratio 2016-17 |
| LIC India | 769386 | 756,399 | 98.31% |
| Max Life Insurance | 9,821 | 9,606 | 97.81% |
| TATA AIA | 2,707 | 2,599 | 96.01% |
| ICICI Prudential Life | 10,901 | 10,539 | 96.68% |
| Aegon Life | 588 | 571 | 97.11% |
| HDFC Standard Life | 12,724 | 12,421 | 97.62% |
| Reliance Life | 11,079 | 10,473 | 94.53% |
| SBI Life | 16,102 | 15,037 | 93.39% |
| Canara HSBC OBC | 653 | 620 | 94.95% |
| Bajaj Allianz Life | 16,239 | 14,887 | 91.67% |
| Sahara Life | 725 | 654 | 90.21% |
| Future Generali | 1,366 | 1,223 | 89.53% |
| Exide Life | 2,973 | 2,866 | 96.40% |
| Kotak Mahindra | 2,831 | 2,583 | 91.24% |
| Birla Sunlife | 6,048 | 5,727 | 94.69% |
| PNB Met Life | 3,879 | 3,380 | 87.14% |
| Edelweiss Tokio | 164 | 153 | 93.29% |
| IDBI Federal | 1,065 | 962 | 90.33% |
| DHFL Pramerica | 471 | 428 | 90.87% |
| Aviva | 1,245 | 1,128 | 90.60% |
| Star Union | 1,473 | 1,238 | 84.05% |
| Bharti AXA | 878 | 811 | 92.37% |
| India First | 1,741 | 1,439 | 82.65% |
| Shriram Life | 2,926 | 1,859 | 63.53% |
Please click on the below-mentioned link.
Steps to check
- Download Annual Report published by IRDA.
- Go to page number 143 for individual claim settlement ratio
IRDA Claim Settlement – Term Insurance
Comparison of Claim Settlement Ratio -2015-16 and 2016-17
| Life Insurance Companies | IRDA Claim Settlement Ratio 2016-17 |
IRDA Claim Settlement Ratio 2015-16 |
Change in Claim Settlement |
| LIC India | 98.31% | 98.33% | -0.02% |
| Max Life Insurance | 97.81% | 96.95% | 0.86% |
| TATA AIA | 96.01% | 96.80% | -0.79% |
| ICICI Prudential Life | 96.68% | 96.20% | 0.48% |
| Aegon Life | 97.11% | 95.31% | 1.80% |
| HDFC Standard Life | 97.62% | 95.02% | 2.60% |
| Reliance Life | 94.53% | 93.82% | 0.71% |
| SBI Life | 93.39% | 93.39% | 0.00% |
| Canara HSBC OBC | 94.95% | 92.99% | 1.96% |
| Bajaj Allianz Life | 91.67% | 91.30% | 0.37% |
| Sahara Life | 90.21% | 90.30% | -0.09% |
| Future Generali | 89.53% | 90.26% | -0.73% |
| Exide Life | 96.40% | 89.36% | 7.04% |
| Kotak Mahindra | 91.24% | 89.09% | 2.15% |
| Birla Sunlife | 94.69% | 88.45% | 6.24% |
| PNB Met Life | 87.14% | 85.36% | 1.78% |
| Edelweiss Tokio | 93.29% | 85.11% | 8.18% |
| IDBI Federal | 90.33% | 84.79% | 5.54% |
| DHFL Pramerica | 90.87% | 83.64% | 7.23% |
| Aviva | 90.60% | 81.97% | 8.63% |
| Star Union | 84.05% | 80.73% | 3.32% |
| Bharti AXA | 92.37% | 80.02% | 12.35% |
| India First | 82.65% | 71.87% | 10.78% |
| Shriram Life | 63.53% | 60.24% | 3.29% |
- Claim settlement ratio of HDFC Life has increased by 2.6%
- ICICI Prudential claim settlement ratio has increased by .48%
- Claim settlement ratio of Max Life Insurance has increase by .86%
- Kotak claim settlement ratio 2016-17 has increased by 2.15%
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 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 cannot 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 rider to the policy, whichever is later.
That means your claim cannot 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 up to 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 Lakh 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, 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 cannot 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 about your current health conditions, medication, family history of hereditary diseases, previous policies held by you, etc. Habits like smoking and drinking also have 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.
You should fill the Proposal Form by yourself. Agents can definitely help you in filling the Proposal Form but never allow them to fill it by themselves by just putting your signature on it.
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.
Reason to worry is when you are hiding the material facts about your health, occupation or your habits like smoking, etc. The chances of claim rejection become high. Though there is a clause of 3 years for the insurance company, it can still reject your claim if they are able to prove that you had hidden some material facts to take advantage out of your insurance policy.
What is your opinion about Claim Settlement Ratio? Will you buy a Term Insurance Plan from a company due to high Claim Settlement Ratio?
But, are there any reasons also for claim rejection. For ex:
1. Person was walking in wrong side of road and vehicle hit him
2. Person was looking outisde train when he hit pole
3. Person died on account of drugs
4. Any other reasons due to illegal act or bad habits
Hey Deepak
Thanks for your comment. Let us cover it one by one
1. Person walking on wrong side – Life insurance claim is not rejected but accidental insurance can be rejected in this case.
2. Again the same answer as above untill the company thinks that it is a suicide and policy has not completed 1 year.
3. If person was already on drugs and has not given the information in proposal form, yes the claim can be rejected.
4. You need to declare the same in your in proposal form – illegal acts, bad habits like smoking or drinking. Yes the claim can be rejected in these scenarios.