Once again Life Insurance Corporation of India (LIC) has topped the list with the Highest Claim Settlement Ratio of 98.14%. These data are declared recently in the Insurance Regulatory and Development Authority of India (IRDA) Annual Report for the year 2013-14.
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What does Claim Settlement Ratio justifies?
Claim Settlement Ratio is a percentage of the claims settled/paid by the Insurance Company in a year. The calculation is done by dividing the total number of claims paid in a year by the total number of claims received (Remember: Claims Received includes current year claims as well as last period?s pending claims which did not get settled).
For instance, an insurance company received 900 claims in a year and the last period?s pending claim was 100. During current year the company paid for 980 claims, then the claim settlement ratio works out to be 98% (980/1000).
Below is the Claim Settlement Ratio of 2013-14
What Claim Settlement data Indicates?
Above table clearly shows that LIC has retain its goodwill by having highest claim settlement ratio. But the figure of one year cannot be taken as the base for making up your mind about the company to go with. One also needs to check the past data of the companies and choose the company which has been consistent in giving good claim settlement ratio.?The table below shows the claim settlement ratio of all the insurance companies over the past three financial years.
LIC had also topped the list for the last 3 years followed by ICICI and HDFC Standard. The other companies like Max Life, SBI Life, Star Union Daichi, Bajaj Allianz and Kotak Mahindra got few ups and downs.?But before jumping onto any result, let’s first know the limitations of the above data.
Drawbacks of the report
1. The claim settlement ration comprises all claims honored by the insurance company for all its?products such as?term insurance, money back policy, endowment cover, child plan, online plan or offline, group insurance or individual cover etc.
2. Reasons for claims rejections are not provided. In general claims are rejected due to incomplete or wrong information or concealment of facts. So never adopt this malpractice of concealing or providing wrong information.
3. Older the Insurance company better would be the claim settlement ratio because the claims received by new company would fall under the category of early claims and including LIC all the early claims are scrutinized thoroughly. This would result into high claim settlement ratio.
4. The above data is for the whole year and does not bifurcate that whether the claim is settled within a few days or taken a whole year.
Words of Wisdom
Claim Settlement Ratio is the most significant factor indicating how the company is treating its customer, but it should not be the only deciding factor behind choosing the insurance plan. One also needs to check Claims Repudiated and claim pending percentage.?Claim Repudiated means Claim Refused to be accepted by Insurance Company and Claims Pending means claims which are yet to be settled.