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.

De-regulation of savings bank deposit interest rates and more

Reserve Bank of India (RBI) announced its second quarter review of Monetary Policy 2011-12 today.  As expected, the repo rate has been hiked by 25 basis points (100 basis points is one percentage) to 8.5%.  The reverse repo rate stands adjusted to 7.5% (spread of 100 basis points below the repo rate).   RBI has stated in its press release that “…momentum indicators, particularly the de-seasonalised quarter-on-quarter headline and core inflation measures, indicate moderation.  This is consistent with the projection that inflation will decline beginning December 2011”.  Thus there are chances that this may be last in series of rate hikes and RBI may take a pause.

De-regulation of Interest Rates

RBI increased interest rates on savings bank deposit to 4% in May 2011.  To complete the process of deregulation of the rates, banks are now free to determine savings bank deposit interest rates, subject to the following two conditions:

1.    for deposits upto Rs. 1 lakh, uniform interest rates shall be offered by all banks.

2.    for deposits above Rs. 1 lakh,  banks are free to provide differential rates of interest.

The operational guidelines, to be released, shall specify how this shall work.  But banks shall not be allowed to discriminate between customers on interest rates for similar amount of deposit.  Thus each bank shall offer different interest rates, depending on the market conditions and interest rate scenarios, on savings bank deposit above Rs. 1 lakh.

Generally it is not advisable to keep substantial amount in savings account since one gets less interest on it.  However it is a positive move considering that traditionally we love to keep money in bank accounts and any increased in interest rates on such deposit is welcome.

Enhancement of Customer Service and no prepayment penalty

Damodaran Committee had made several recommendations for improving customer service in banks.  10 action points on which broad consensus have emerged has been decided to be implemented.  

Key points amongst the 10 actions points are:

1.   No pre-payment penalty for floating rate loans.  However fixed rate loans shall continue to have pre-payment penalty.

2.   Issue of TDS certificate and to dispatch it to account holder’s mailing address.

3.   One view of all bank accounts (savings, fixed deposits, loans, etc) with a bank.

Also Read: Future of banking experience in India 

Though RBI has increased interest rates, which can lead to increase in rates for home and other loans products, deregulation of savings deposit interest rates, abolition of prepayment penalty on floating rate loans and improvement in customer service are few positives from this monetary review announced a day before Diwali. 

Happy Diwali!!!