The claim settlement ratio for life insurance slightly decreased in 2022-23 to 98.45%, compared to 98.64% in 2021-22, according to the Insurance Regulatory and Development Authority of India (IRDAI) annual report. This decrease is mirrored in both the public and private sectors, with Life Insurance Corporation (LIC) settling at 98.52% (down from 98.84%) and private counterparts marking 98.02% (a slight drop from 98.11%).
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The health insurance sector, however, revealed a different narrative.
While general and health insurance companies settled 85.66% of claims based on policy count, the amount paid out was lower at 71.62%.
The claim settlement ratio, often considered an important metric while buying any policy, shows the percentage of claims the insurance company has paid out during a certain period.
The ratio is determined by dividing the total number of claims approved by the number of claims received by the insurance company.
For example, if the life insurance provider received a total of 100 death claims and settled 90 of them, then the claim settlement ratio is 90%.
Actual death claims of life insurers
(Source: IRDAI annual report)
A higher settlement ratio is proportional to a company’s honour of commitments made at the time of purchase. It gives assurance that the promise will be kept at the time of need, insurance experts believe.
The claim settlement ratio also portrays the underwriting processes that the company follows.
Underwriting is the process of evaluating an insurance application that includes determining applicants' risk by reviewing their medical and financial information.
Here's a look at quarterly claim settlement ratios of a few life private insurance providers:
| Life Insurance Company | Claim Settlement Ratio Q2- FY2024 | Claim Settlement Ratio Q1- FY2024 |
| ICICI Prudential Life Insurance | 98.14% | 97.9% |
| TATA AIA Life Insurance | 90.55% | 77.3% |
| HDFC Life | 96.62% | 96.7% |
| Bajaj Allianz Life Insurance | 91.79% | 93.5% |
| Max Life Insurance | 95.90% | 86.3% |
| SBI Life Insurance | 95.67% | 95.8% |
(Source: Public disclosure available on company’s website)
(Edited by : Shoma Bhattacharjee)
First Published: Jan 1, 2024 6:34 PM IST
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