IRDAI Claim Settlement Ratio (CSR) 2016-17

The insurance regulator IRDAI, recently has published its Annual Report for the Financial Year 2016-17. The report also throws light on the “Claim Settlement Ratio” of the insurance companies in India.

What is Claim Settlement Ratio (CSR)?

As the name suggests, Claim settlement ratio is the percentage of claims settled by the insurance company out of the total claims reported in a given financial year. It is a ratio derived as Death claims settled over claims reported.

Claim Settlement Ratio = Total claims settled / Total claims received*
Where Total Claims received * =  Claims reported in the financial year plus claims pending at the start of the year

The claim settlement ratio (CSR) is not for a particular type of insurance plan like CSR of a term plan or unit linked insurance plan rather it is a claim settlement ratio based on cumulative death claims received by the insurance company for individual life insurance policies. Claim Settlement Ratio of the insurers above 95% is considered exceptional and claim settlement ratio above 90% is considered good to go with.

Claim Settlement Ratio for the Financial Year 2016-17

Life Insurers Claims Pending at the start of the period Claims Intimated
(FY 2016-17)
Total Claims (Claims Pending + Claims Intimated) Claims Paid
(FY 2016-17)
CSR%
(FY 2016-17)
LIC 3914 765472 769386 756399 98.31%
Max Life 4 9817 9821 9606 97.81%
HDFC Life 79 12645 12724 12421 97.62%
Aegon Life 5 583 588 571 97.11%
SBI Life 298 17312 17610 17027 96.69%
ICICI Prudential 33 10868 10901 10539 96.68%
Exide Life 17 2956 2973 2866 96.40%
Tata AIA 0 2707 2707 2599 96.01%
Canara HSBC OBC 4 649 653 620 94.95%
Birla Sunlife 266 5782 6048 5727 94.69%
Reliance Life 183 10896 11079 10473 94.53%
Edelweiss Tokio 3 161 164 153 93.29%
Bharti Axa 86 792 878 811 92.37%
Bajaj Allianz 423 15816 16239 14887 91.67%
Kotak Life 92 2739 2831 2583 91.24%
DHFL Pramerica 13 458 471 428 90.87%
Aviva 10 1235 1245 1128 90.60%
IDBI Federal 20 1045 1065 962 90.33%
Sahara Life 25 700 725 654 90.21%
Future Generali 17 1349 1366 1223 89.53%
PNB MetLife 26 3853 3879 3380 87.14%
Star Union Life 191 1282 1473 1238 84.05%
India First 50 1691 1741 1439 82.65%
Shriram Life 272 2654 2926 1859 63.53%
Industry Figures 6031 873462 879493 859593 97.74%

csr-2016-17

Key Findings:

  • There are eight life insurance companies which makes up to the top Life insurers with more than 95% as Claim Settlement Ratio which are LIC (with highest claim settlement ratio) followed by Max Life, HDFC Life, Aegon Life, SBI Life, Kotak Life, Exide Life & Tata AIA.
  • There are eleven life insurance companies having Claim settlement ratio (CSR) greater than 90% and less than 95%. Such life insurance companies are Canara HSBC, Reliance Life, Bharti Axa Life, Bajaj Allianz, Aviva, Sahara Life, etc.
  • For the financial year 2016-17, the life insurance companies collectively had settled 8.60 lakhs claims on individual policies, disbursing Rs 13,850.62 crore as total payout. The number of claims repudiated/rejected was 12,769 in number amounting to Rs 657.77 crore collectively.
  • For private insurance companies, settlement ratio had gone up by 2.24 % at 93.72% during the financial year 2016-17 compared to 91.48% during the previous year.
  • The repudiation came down to 4.85 % in the year 2016-17 compared to the 6.67 % in the previous year.
  • The industry settlement ratio increased to 97.74 % in 2016-17 from 97.43% in 2015-16 and the repudiation ratio decreased to 1.45% compared to the 1.73% in 2015-16.

Why it is Important to Check CSR before you Buy a Life Insurance Policy?

Settlement of Claim is one of the most important services which is provided by an insurance company. The fundamental of buying a life insurance policy is with an intent to provide the financial security to the family of the life insured as discussed earlier. Financial security comes into picture in the case of an untimely or unfortunate demise of the life insured. Settlement of death claim by the insurance company is the most important and essential event in the times of distress for the family members of the deceased.

That’s why knowing the reliability of a company regarding its claim settlement is very much necessary. This index determines the claim settlement capacity of the life insurance company. Claim Settlement Ratio is an indicator about the insurance company’s approach towards  the settlement of reported death claims. Higher the claim settlement ratio, the greater are the chances of settlement of claim. Also, it depicts good reputation regarding the claims processing. Higher the claim settlement ratio, better is the insurance company.

Higher the claim settlement ratio, the more favorable it would be for the policyholder. That’s why one should always look for a Claim Settlement Ratio figure before buying a life insurance policy. However, this is one of the factors to be looked upon before buying a life insurance policy and must be compiled with other important things to finalize the insurance plan and insurance company.

Key Important Things Regarding Claim Settlement Ratio (CSR):

  • The Claim settlement ratio is not for a particular type of product. It is a common death claim settlement ratio. But for the life insurance products like Term Plan, looking at a claim settlement ratio is all the more important as pure Term Plan offers only death benefit.
  • Higher claim settlement ratio depicts the greater settlement of death claims by the insurance company out of the total death claims reported. Higher the number of CSR better are the prospects and likelihood of the settlement of a death claim by the insurer. Lower claim settlement ratio implies that the insurer has rejected a large number of claims out of the total reported.
  • Claim Settlement Ratio for the current financial year is certainly important to look upon. But the past trends of claim settlement ratio are also imperative to be considered to judge the consistency of the insurance company. (see the last 5 years Claim settlement ratios of the Life Insurance Companies)
  • The claim settlement ratio is an important factor to consider before you buy a life insurance plan, but overlooking other important things is not prudent. It is important to give due weightage to the plan features, benefits, policy wordings, inclusions & exclusions, etc.
  • Claims can be rejected based on the wrong information provided by the policyholder at the inception stage. One should always provide the factual data to the insurance company. The insurance company is not always responsible for rejection of claim as there are many cases of impersonation, misrepresentation and fraud claims.
  • The claim settlement ratio could be lower for the new entrants in the industry as they have limited business initially and death claims are very less to be reported which could lead to low claim settlement ratio.

Harjot Singh Narula

Harjot Narula is founder and CEO of ComparePolicy.com, an IRDAI approved insurance web aggregator focussed on selling online insurance for companies. Harjot has more than a decade of experience in software development and has also spent 5 years in US working for the mortgage and risk management industry.

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