When buying a life insurance policy, the claim settlement ratio is an important factor to consider. The claim settlement ratio is a metric to gauge the percentage of life insurance claims an insurer has settled during a financial year against the number of claims it receives in the period including pending claims from last year.

The Insurance Regulatory and Development Authority of India (IRDAI), in its latest annual report, has given details of claim settlements of all life insurance companies for the year 2019-20. Max Life Insurance has the highest claim settlement ratio in terms of number of claims with 99.22%. This is followed by HDFC Life Insurance and Tata AIA Life Insurance with 99.07% and 99.06%, respectively. Out of the top 10 life insurers, nine have a claim settlement ratio of more than 98%.

The biggest life insurance company, LIC of India has a claim settlement ratio of 96.69% for the year 2019-20.

Top 10 life insurance companies by number of policies settled

Individual death claims settlement by % of policies
Total Claims Claims paid Claims Repudiated
Insurer Number Number % of Total Claims Number % of Total Claims
Max Life 15463 15342 99.22% 120 0.78%
HDFC 12626 12509 99.07% 54 0.43%
Tata AIA 2982 2954 99.06% 28 0.94%
Pramerica Life 569 560 98.42% 7 1.23%
Exide Life 3468 3404 98.15% 26 0.75%
Canara HSBC OBC 1276 1252 98.12% 22 1.72%
Reliance Nippon 8017 7866 98.12% 149 1.86%
Bajaj Allianz 12127 11887 98.02% 237 1.95%
Aegon 351 344 98.01% 7 1.99%
ICICI Prudential 11460 11212 97.84% 153 1.34%
Source: IRDAI Annual Report 2019-20

Claims repudiated is basically how many claims the insurer found to be invalid and hence, did not pay the claimed amount. There are many reasons a life insurance company will repudiate a claim after it has accepted it for processing.

Don’t forget to check the settlement ratio for the benefit amount
One should not only look at the number of claims settled, but while buying an insurance policy, one should also check the benefit amount that the life insurer has settled. A life insurance company may have a higher percentage of claim settlement by number of policies but a lower percentage when it comes to paying the benefit amount. This happens especially when the life insurance pays higher number of claims of lower benefit amounts and repudiates policies with higher benefit amount, i.e., policies with higher life insurance cover.

Therefore, while selecting an insurance policy, make sure that the insurer scores well on both claims settlement ratio and the benefit amount settled.

Top 10 life insurance companies by benefit amount settlement

Individual death claims settlement by % of benefit amount
Total Claims Claims paid Claims Repudiated
Insurer No. of Policies Amount (Rs Cr) Amount (Rs Cr) % of Total Claims Amount (Rs Cr) % of Total Claims
Aviva 810 83.33 80.78 96.94% 0.97 1.16%
Tata AIA 2982 231.96 222.47 95.91% 9.49 4.09%
Pramerica Life 569 23.43 22.44 95.78% 0.77 3.28%
Bharti Axa 1320 64.29 61.56 95.75% 1.58 2.45%
Star Union 1248 53.29 50.47 94.71% 2.1 3.93%
Max Life 15463 595.43 562.54 94.48% 32.88 5.52%
Reliance Nippon 8017 167.03 157.03 94.01% 9.43 5.64%
Aegon 351 69 64.6 93.63% 4.4 6.37%
Bajaj Allianz 12127 332.15 310.71 93.55% 20.78 6.26%
LIC 758916 13694.34 12797.85 93.45% 205.02 1.50%
Source IRDA Annual Report 2019-20

Size matters
Though these are the insurance companies with the highest percentage of claims settled, one needs to understand that the size of an insurance company also plays an important role in maintaining a higher claim settlement ratio. It becomes a challenge for big life insurance companies with a large policyholder base to remain in the top bracket in the claim settlement ratio table.

For a smaller insurer, it is easier to have tight control on the underwriting checks and balances at the time of issuing a new policy. These checks allow the insurance company to conduct a thorough investigation at the time of issuing a policy to avoid any policies which may have higher risks than the acceptable underwriting parameters. The same happens with the claim settlement process. As the base grows, it becomes challenging to maintain the same quality of scrutiny.

LIC versus private insurers
While all the private life insurance companies put together had 1.16 lakh claims to be settled in the year 2019-20, LIC had a 7.58 lakh claims for settlement. The total benefit amount claimed from private life insurance companies was Rs 5,725 crore where as LIC had a total benefit claim amount of Rs 13,694 crore. With such a huge base, it is remarkable that the biggest life insurance company, LIC of India has performed quite well to maintain a settlement ratio of 96.69% by number of policies and 93.45% by benefit amount and be in top bracket.

Read more: EconomicTimes


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