In November 2010, Bachhat carried out a claim
settlement analysis of life insurance companies to understand which company provides the assurance of quick
settlement of claims. The analysis
carried out in November was based on the data for the year 2009-10. Bachhat
had stated to do more such analysis in future and today we shall have a
look at how the life insurance companies have fared in their claim settlement for
the year 2010-11.
Why claim settlement analysis is important?
Before deep diving into the
analysis, let us recap why the analysis of claim settlement is important. Besides the premium charged by the insurer,
two additional important things one should consider before choosing an insurer
is the probability of getting the claim settled in the event of the death and
the time taken to settle the claim.
Nobody will like to be in a
situation where one has paid the premium diligently for 20 years and after his death,
the claim is disapproved for any reason.
One will also not like to be in a situation where his family gets the
insurance proceeds after 6 months or say even after 1 year of the death. Hence it is necessary to do the analysis of
claims settled by the insurance companies.
It will help you know which company rejects the least number of claims
and process the claims quicker.
Claim
Settlement Analysis
The table below gives the best
five and the bottom five life insurance companies in terms of claim rejection
for the year 2010-11. Best companies
have the least claim rejection ratio whereas bottom five companies have the highest
claim rejection ratio. The list is further broken down into how old these
rejected policies where when the death occurred. Older the policies less should be the chance
of rejection.
Best five insurance
companies in terms of claim rejection
Insurer
|
% Claims Rejected
|
< 2 yrs old policy
|
> 2 yrs old policy
|
LIC
|
1%
|
92%
|
8%
|
Star Union Dai-ichi
|
1%
|
100%
|
0%
|
ICICI Prudential
|
3%
|
82%
|
18%
|
ING Vyasa
|
4%
|
88%
|
12%
|
Kotak
|
4%
|
92%
|
8%
|
Bottom five insurance
companies in terms of claim rejection
Insurer
|
% Claims Rejected
|
< 2 yrs old policy
|
> 2 yrs old policy
|
Aegon Religare
|
45%
|
100%
|
0%
|
Shriram Life
|
26%
|
88%
|
12%
|
Future Generali
|
22%
|
100%
|
0%
|
IDBI Federal
|
21%
|
94%
|
6%
|
DLF Pramerica
|
20%
|
100%
|
0%
|
LIC is the best amongst the
entire lot of insurance companies with only 1% of the claims getting
rejected. ICICI Prudential and Kotak
Life are amongst the private insurance companies making it to the
best five listing.
Aegon Religare tops the
list of bottom five companies with 45 out of every 100 claims rejected during
the period under review. Shriram Life,
Future Generali Life, IDBI Federal and DLF Pramerica are other insurance
companies which have claim rejection ratio of greater than 20%.
If we notice the age of the
policies for which claims are rejected, mostly all of them are less than 2
years old. In Aegon Religare case, all
the claims rejected are for policies less than 2 years old. The relevance of 2 years is insurance company
can not reject claims for policies which are more than 2 years old on the basis that
the policy was taken based on misrepresented facts, unless the insurance
company shows that such misrepresentation was material and fraudulently made
and policy holder knew that he is misrepresenting material fact. Thus, generally unless proved otherwise by
the insurance company, claim pertaining to policies more than two years old
should get settled. However, that does
not mean that any claims made within first 2 years of the policy should be
rejected. Such claims can go for additional
scrutiny but should get settled if found in order.
Thus it becomes interesting
to know the companies which have rejected most numbers of claims for policies
greater than 2 years.
Insurer
|
% Claims Rejected
|
< 2 yrs old policy
|
> 2 yrs old policy
|
SBI
|
17%
|
58%
|
42%
|
Aviva
|
12%
|
72%
|
28%
|
ICICI Prudential
|
3%
|
82%
|
18%
|
Bajaj Allianz
|
7%
|
83%
|
17%
|
ING Vyasa
|
4%
|
88%
|
12%
|
For eg. SBI Life has
rejected 17 out of every 100 claims made.
42% of such rejected claims are for policies in force for more than 2
years. There has to be very compelling
reasons to reject such claims and it shall be interesting to know about such
reasons.
It shall also be
interesting to know how many of the claims made within first 2 years of the
policy are settled. Unfortunately, the
insurance companies are not mandated to provide such details.
Another way to look at the
claim rejection ratio is to check whether such high rejection ratios are one
time event or a regular feature. The
graph below provides claim rejection ratio for all life insurance companies for
last two years and one can notice that there has not been substantial
difference in the two years. Furthermore,
many of the companies have rejected more claims in 2010-11 as compared to in
2009-10.
Claim
Turnaround Time
Let us now look at the time taken for insurance companies to settle the claim once they receive claim intimation from the claimant. There can be some delays due to additional documents required by the insurance companies or on account of certain queries raised on the policies. However, generally the claim settlement should not be prolonged.
There are
insurance companies where more than 50% of the claims submitted are outstanding
for more than 3 months. The graph below
provides an overview, with the quickest turnaround companies at the top and the
slowest at the bottom. The colours in
each bar represent the time taken to settle the claims.
Sahara has the worst turnaround time followed by Future Generali Life
and Shriram Life. The better way to look at this could be to see the response time once all the documents relating to claim are submitted by the claimant. Bachhat is compiling list of such instances and shall do a follow up post on the same.
Conclusion
LIC stands out with the lowest claim rejection ratio
and also a decent turnaround time. In
private sector, Kotak Life and ICICI Prudential have low claim rejection ratio. Kotak Life is better than ICICI Prudential in
rejecting claims for policies in force for more than 2 years, whereas ICICI
Prudential scores over Kotak Life in claim turnaround time.
Companies like Aegon Religare and Star Union Daichi have started operations
in last 2-4 years and we need to give them more time so that more sensible
analysis can be carried out on their claim settlement details.
Thus the cheapest term plan available may not be the
best one to opt for. One has to also
look at the company’s claim settlement ratio as well as claim turnaround time
before zeroing on any insurance company.
Have any of yours insurance claim got rejected? I shall be happy to hear your experiences, views and suggestions in the comment section below.
Post revised on January 12, 2012
Data source for analysis: IRDA Annual Report 2010-11 and Insurance companies website
