Registry of Claims Settlement of Private Insurance Companies

As we know there are about 20 private life insurance companies in India and LIC which is a public sector company. LIC is the 800-pound gorilla, which managed to hold around 75% of the market share even 10 years after private companies were allowed into the life insurance space. Private life companies position themselves on being more customer-friendly, a broader range of products, etc., while LIC clings to its position of trust, experience, and government backing. One of the key parameters by which to judge a life insurance company is its claims payment history. At the same time, we should note that as life has become more of a savings and investment product, the returns it provides are perhaps more important than claims payout rates. However, the claims record is definitely not a variable to ignore. Below is a table illustrating the claim rejection rates for the major life insurance companies in 2009-10:

Life Companies: Claims rejection ratio (%)

Lic: 1.21%

Revive: 9.75%

Bajaj Allianz: 5.2%

Birla SolVida: 10.62%

HDFC Life: 4.67%

ICICI Prudential: 3.27%

ING Visia: 4.26%

Kotak Mahindra: 4.29%

Maximum life in New York: 12.31%

Met Life: 5.94%

Trust Life: 7.05%

OSE Life: 14.75%

Tata AIG: 12.3%

An important observation from the table above is that LIC’s claims ratio is the lowest, implying that it has the best track record when it comes to paying claims. At the same time, the very high percentage of denial claims from SBI Life and Max New York Life is surely surprising.

However, it should be noted once again that in the Unit Linked products that are aggressively promoted by life organizations (or at least promoted up to September 2010), the returns earned on the fund are perhaps a more important variable than the rate of return. payment (or rejection) of claims. However, for non-life companies, which offer pure protection/insurance products without a savings or investment component, claims payout is the crucial variable along with speed of claims processing.

Now let’s look at the incurred claims ratios for non-life companies:

Non-Life Insurance Company: Loss ratio

New India Guarantee: 89%

Oriental Insurance: 99.69%

United India Insurance: 78.62%

National Insurance: 99.16%

Royal Sundaram: 68.95%

General Trust Insurance:77.3%

Iffco Tokyo Insurance: 83.44%

Tata AIG: 60.54%

Lombardo ICICI: 85.35%

Bajaj Allianz: 71.9%

Ergonomic HDFC: 80.73%

Bharti Axa:104%%

One data point that stands out from the above is that Tata AIG General Insurance appears to be getting the best quality business from an underwriting standpoint, while Bharti Axa’s claims payout ratio appears to be quite high. In addition, the claims payment rate of public insurers, in general, is higher than that of private non-life insurers.