Latest life insurance claim settlement ratio of companies in 2022

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The claims settlement ratio of a life insurance company is an important factor to consider when buying an insurance policy. The claim settlement ratio is a metric used to gauge the percentage of life insurance claims an insurer has settled during a financial year against the number of claims it has received including pending claims from the previous year.

According to the Insurance Regulatory and Development Authority of India’s (IRDAI) annual report for 2020-21, “In case of individual life insurance business, during the year 2020-21, out of the total 11.01 lakh claims, the life insurers paid 10.84 lakh claims, with a total benefit amount of Rs 26,422 crore. The number of claims repudiated was 9,527 for an amount of Rs 865 crore and the number of claims rejected was 3,032 for an amount of .60 crore. The claims pending at the end of the year was 3,055 for Rs 623 crore.”

The claim settlement ratio of LIC was 98.62 per cent as at March 31, 2021 compared to 96.69 per cent as at March 31, 2020 and the proportion of claims repudiated/rejected has decreased to 1.0 per cent in 2020-21 from 1.09 per cent in the previous year. “The claim settlement ratio of private insurers was 97.02 per cent during 2020-21 (97.18 per cent during 2019-20) and the proportion of repudiations came down to 2.0 per cent in the year 2020-21 from 2.50 per cent in previous year. The life insurance industry’s settlement ratio increased to 98.39 per cent in 2020-21 from 96.76 per cent in 2019-20 and the repudiation/rejection ratio decreased to 1.14 per cent from 1.28 per cent in 2019-20,” the IRDAI annual report stated.

Claims repudiated is basically how many claims the insurer found to be invalid and hence, did not pay the claimed amount.

Settlement of COVID-19 related death claim

IRDAI has advised all insurers to settle life insurance claims as soon as possible.

irdai-covid

“The medical expense for COVID19 has cost huge to the patients and a huge number of people have lost their lives. hence the dependency on the insurance companies increased multifold in last two years. Thus, the claim settlement ratio becomes a lot more crucial during pandemic led scenario to ensure that the insurance company is able to provide services to the policyholder, whether for hospitalization or in the occurrence of a death, as committed by them to seek the timely access to medical facilities without any financial blockage and the financial support for the loved one who are left behind respectively,” says Naval Goel, Founder & CEO, PolicyX.com .

How claims settlement ratio helps

This ratio indicates how many claims the insurance firm has paid out of every 100 that it gets. If the claims settlement ratio is 90%, it signifies that the insurer paid 90 claims out of 100 within the stated time period and did not pay the other 10 claims.

Not only should a good insurance company honour all qualified claims, but it should also handle them as quickly as possible.

“The claim settlement ratio showcases the past record of the insurance company in handling claim cases raised by their customers and brings transparency on the performance of the insurance company for new customers. The percentage is calculated on the basis of the claims settled against the claims raised by the customers. The higher claim settlement ratio is always considered positive as it showcases that the insurance company has been successful in providing committed service to their customers, assuring new customers that their claim will be settled without a much hassle,” says Goel.

What should be the ideal incurred claims ratio?

Though these are the insurance companies with the highest percentage of claims settled, one needs to understand that the size of an insurance company also plays an important role in maintaining a higher claim settlement ratio. It becomes a challenge for big life insurance companies with a large policyholder base to remain in the top bracket in the claim settlement ratio table.

For a smaller insurer, it is easier to have tight control on the underwriting checks and balances at the time of issuing a new policy. These checks allow the insurance company to conduct a thorough investigation at the time of issuing a policy to avoid any policies which may have higher risks than the acceptable underwriting parameters. The same happens with the claim settlement process. As the base grows, it becomes challenging to maintain the same quality of scrutiny.



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