Top Life Insurance Companies based on Claim Processing Efficiency

It is always difficult to choose life insurance companies for insurance cover.  There are various parameters which one needs to go through.  One of the most important parameters out of this is claim processing efficiency of life insurance companies.  Remember, for term life insurance, claim arises after your death.  Hence your family members need to make a claim and follow up with life insurance company for settlement.  Thus you need to ensure that their experience is hassle-free.

With this in mind, Bachhat has analysed claim processing efficiency of all life insurance companies for last 4 years (from 2009-10 to 2012-13).  While there is lots of data to play around with, presented below are key charts and takeaways for the readers.

Best 5 companies in settling claims

This is ascertained from low claim rejection rates.  Lower the rate, the better.

The largest player, LIC has the lowest rejection percentage as compared to all other insurers.  HDFC Life (erstwhile HDFC Standard), Star Union Dai-ichi, ICICI Prudential and SBI Life follows in that order.

Worst 5 companies in settling claims

Edelweiss Tokio has the highest claim rejection rate.  This is followed by Aegon Religare, Shriram Life, India First and Future Generali.  Pertinent thing to note here is that new companies have high claim rejection rate in initial years.

Time taken to settle claims

Another aspect to look is the time taken to settle once the claim has been filed in all proper respect with the insurance company.  Lesser the time, the better.

Based on FY12-13 data, DLF Pramerica has the worst record in this with only 3% claims settled within 1 month and as much as 58% taking atleast 6 months to get settle.  Similarly, Sahara, Star Union Dai-ichi, Edelweiss Tokio and Canara HSBC have substantial delays in settlement.

Let us also take a look at claim settlement record of best 5 companies which were shortlisted based on claim rejection rate above.

All companies, except for Star Union Dai-ichi, have good claim settlement record.

Outstanding Claim Analysis

Another way to look at delays in claim settlement is by analysing the ageing of claims outstanding.  Lets look at the ageing of claims outstanding for above 5 companies as of 2012-13.

From the above, it can be seen that out of total claims outstanding at the end of 2012-2013, for LIC 60% of  claims were outstanding for more than 3 months and almost 1/4th were outstanding for more than a year.  ICICI Prudential and HDFC Life fared better in this with only 17% and 4% of claims respectively outstanding for more than 3 months.

Conclusion

Based on the above, it can be concluded that ICICI Prudential, HDFC Life and SBI Life are most efficient in claim settlement process.  LIC also has decent record of claim settlement, but at times claims may get stuck.  In our subsequent analysis, we shall compare the competitiveness of the term plans of these companies.

PS:  Kindly note that above analysis has some inherent limitation such as (i) new insurance companies having sub-optimal claim settlement ratios, (ii) the analysis covers not only term plans but all life insurance plans (settlement ratios for term plan may drastically vary from this, but specific information for term plan is not available), etc. 

What has been your claim settlement experience?  Kindly share it with other readers in the comment section below.