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Claim Settlement Ratio for Life Insurance Companies for 2010-11

by Gopal Gidwani on February 7, 2012 100 comments in Financial Planning,Insurance ,Others,Uncategorized
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Introduction Naresh Malhotra is a 30 year old marketing executive. He is on the lookout for a pure term insurance plan for a cover of Rs . 50 lakhs for a period of 20 years. He is in a quandary over which company to select for purchasing a term insurance plan . Term insurance plans are also popularly known as protection plans. These plans provide risk cover for loss of income, financial liabilities (home loan and other loans), financial responsibilities (childrens education, marriage etc.) against untimely death of the family bread earner. Naresh has done some research on different term insurance plans available in the market. He is in a dilemma on two fronts. 1) Should I go for lower premium??? Naresh is quite surprised by the amount of variance (difference) in the premium charged for term plans (with same features) by different companies. On one hand there is LICs Amulya Jeevan Term Plan that charges Rs . 12,850 for a 30 year old person for a cover of Rs . 50 lakhs for a term of 20 years. On the other hand we have Aegon Religares iTerm Plan that charges Rs. 4302 for the same 30 year old person for a same cover of Rs . 50 lakhs for a same term of 20 years. So for a term plan with same features, the premium charged by LIC is a whopping 3 times more than the premium charged by Aegon Religare!!! 5/24/2012 2:26:36 PM

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Claim Settlement Ratio for Life Insurance Companies 2010-11 | bachatkhata.com

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every 100 claim requests received by the company. LICs claim settlement ratio for the year 2010-11 was 97.03%, which in simple terms means out of every 100 claims LIC received during the year 2010-11, it paid 97 claims. This does not mean the remaining 3% claims were rejected. Some claims might be still under consideration, some inquiry pending while some may have been rejected for various reasons. In a term plan , claim settlement ratio is an important indicator of customer service, which needs to be given little more precedence over other aspects, while selecting a term insurance plan. The reason being it is important to ensure that your beneficiaries do not face much problems in receiving the claim in case of your unfortunate demise. Low premium Vs. High claim settlement ratio dilemma!!! While selecting a term plan, Naresh is in a fix whether he should give more importance to the lower premium charged for online term plans by private insurers or give more importance to the high claim settlement ratio maintained by LIC year after year. Naresh is unable to decide. Like Naresh there are lot of other people who are caught between low premium and high claim settlement ratio and are unable to decide whom should they give preference over the other . In this article we try to present a comparison of the claim settlement ratio of insurance companies (for the years 2009-2010 and 2010-2011) along with the premium charged by these companies for their term plans. We sincerely hope that to some extent this article helps people like Naresh and others decide which term plan they should go for. Please note: When choosing a term plan, while claim settlement ratio and premium charged are two very important aspects, they are not the only ones that matter. Some other equally important aspects that need consideration are the persons (need) requirement, features of the plan , customer service of the company etc. In the below table let us look at the comparison of claim settlement ratio for life insurance companies for the year 2009-10 and 2010-11 and the premiums charged by these companies for their term plans.

Insurer

Claim Settlement Ratio 2010-11

Claim Settlement Ratio 2009-10

Term Plan

Premium charged

LIC

97.03

96.54

Amulya Jeevan

12,850**

HDFC Life

95.41

91.14

Click2Protect

5,625

Birla Sunlife

94.66

89.09

Protector Plus

7,721

ICICI Prudential

94.61

90.17

iCare

6,783

ING Vysya

90.49

89.30

ING Term Life

12,265

Kotak Life

89.30

86.97

ePreferred

5,487

Bajaj Allianz

88.69

88.19

New Risk Care II

Bharti AXA

87.17

77.8

iProtect

4302

Metlife

85.43

82.54

MetProtect

5,294

Aviva

84.15

87.11

iLife

4,436**

SBI Life

82.24

83.27

Smart Shield

7956

IndiaFirst

82.01

53.85

AnyTime

6162**

TATA AIG

81.93

78.17

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MaxNew YorkLife

77.96

65.51

Canara HSBC

71.02

38.71

IDBI Federal

64.92

49.52

Shriram Life

55.69

39.54

Sahara

53.23

63.06

Aegon Religare

52.31

48

iTerm Plan

4302

DLF Pramerica

51.22

40

Future Generali

50.52

38.85

Source: Claim settlement ratio has been taken from IRDA Annual Report 2009-10 and 2010-11. The claim settlement ratio mentioned is the overall claim settlement ratio for the insurance company (all insurance products) and not just for term plans. The premium calculations have been done from the respective insurance company websites. Please note: 1) The premiums shown in the above table are for a 30 year old male for a sum assured of Rs . 50 lakhs for a term of 20 years. 2) In the above table where only the premium amount is mentioned, it means it is inclusive of service tax 3) Where ** is mentioned next to the premium amount, it means it is not sure whether the premium is inclusive or exclusive of service tax. 4) Interested buyers are requested to recheck these quotes with respective insurance companies before purchasing a term plan. These rates may not be fixed and are subject to change. 5) We are not representing any particular insurance company. As can be seen from the above table the claim settlement ratio of most life insurance companies has improved in 2010-11 as compared to 2009-10. LIC remains a clear leader in terms of claim settlement ratio with 97.03% for 2010-11 compared to 96.54% for 2009-10. The top three private insurance companies in terms of claim settlement ratio are HDFC Life (95.41%), Birla Sunlife (94.66%) and ICICI Prudential (94.61%). There are also some companies for which claim settlement ratio has gone down for 2010-11 as compared to 2009-10 companies such as Aviva Life Insurance, SBI Life and Reliance Life. Low Premium: Apart from claim settlement ratio, the amount of premium that needs to be paid for availing insurance cover (sum assured) is also an important consideration for selection of a term insurance plan. There can be significant difference in the premium of different insurance companies for same amount of insurance cover . Apart from offline term plans, lot of insurance companies have also started offering online term insurance plans since last couple of years. Premium for an online term insurance plan, can be as low as 40-50% as compared to offline term insurance plans due to reduced office and intermediary expenses. As can be seen from the table above , in terms of premium, LIC has the highest premium and Aegon Religare & Bharti Axa have the lowest premium. The top three term plans in terms of low premium are iTerm by Aegon Religare, iProtect by Bharti Axa, i-Life by Aviva. All three of them are online term plans. Our take on the above table Apart from the above information, in this section we try to give you some pointers which may be helpful to you in making up your mind on which term insurance plan to go for. 1) LIC Amulya Jeevan: LIC leads in terms of highest claim settlement ratio. Despite charging high premiums LIC continues to have the highest market share and continues to remain the undisputed king. LICs Amulya Jeevan comes with a minimum sum assured of Rs. 25 lakhs and maximum tenure of 35 years. For those looking for a sum assured below Rs. 25 lakhs, LIC offers Anmol Jeevan. Last year in September 2011 LIC did make an announcement that they are soon coming out with a cheaper online term insurance plan . But after that there is no update on that news and the wait for a cheaper online term plan from the LIC stable continues. Conclusion: People who give the highest weightage to claim settlement ratio over everything else can choose to go with LIC. http://www.bachatkhata.com/2012/02/claim-settlement-ratio-for-life-insurance-companies-for-2010-11.html 5/24/2012 2:26:36 PM

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The premium being charged by HDFC Life for Click2Protect is Rs. 5625 which is lower than the premium charged by Birla SunLife (Protector Plus Rs . 7,721) and ICICI Prudential (iCare Rs 6783) for a similar plan. The minimum sum assured under Click2Protect is Rs 10 lakhs and maximum is Rs. 10 crores. The maximum policy tenure is 30 years and premium payment mode can be only annual / yearly (no monthly, quarterly, half yearly option offered). There are no riders being offered under this plan . Conclusion: Somebody who is looking for low premium, high claim settlement ratio , fixed sum assured and no riders; this policy is good. Our Thumbs Up to this product !!! b) Birla SunLife Protector Plus: The claim settlement ratio of Birla SunLife is third best in the industry at 94.66%. The premium being charged by Birla SunLife for Protector Plus is Rs. 7721 which is little higher than the premium charged by HDFC Life (Click2Protect Rs . 5,625) and ICICI Prudential (iCare Rs 6783) for a similar plan . For people looking for a cover less than Rs 50 lakhs, Birla SunLife offers Protector Plan and for those looking for a cover higher than Rs 50 lakhs, Birla SunLife offers Protector Plus Plan. The policy comes with a maximum tenure of 30 years. The policy allows you to keep your cover constant (level term) throughout the policy or the option to increase sum assured by 5% or 10% every year. The choice has to be specified at the inception of the policy. If the option of increased (5% or 10%) sum assured is chosen the premium will be higher than a level term plan , but this higher premium will stay constant throughout the policy term and not increase every year. The policy also offers a choice of 5 riders to choose from for nominal extra cost. These riders include accidental death and disability rider, critical illness rider, surgical care rider, hospital care rider, waiver of premium rider. Conclusion: The choice of increasing the sum assured by 5% or 10% a year and the choice of 5 riders make up for a little higher premium being charged in this plan as compared to HDFC Life Click2Protect and ICICI Prudential iCare. Somebody who is looking for high claim settlement ratio , increased sum assured, choice of riders can definitely go for this policy , albeit at a little higher premium compared to similar plans being offered in the market. Our Thumbs Up for this Product!!! c) ICICI Prudential iCare : The claim settlement ratio of ICICI Prudential is fourth best in the industry at 94.61%. The premium being charged by ICICI Prudential for iCare is Rs. 6,783 which is little higher than the premium charged by HDFC Life (Click2Protect Rs. 5,625) and lower than the premium being charged by Birla SunLife (Protector Plus Rs 7,721) for a similar plan . The policy comes with a maximum tenure of 30 years and a minimum sum assured of Rs. 10 lakhs. The policy comes in 2 variants: only sum assured or sum assured plus accidental death benefit. Conclusion: When compared with HDFC Click2Protect, the accidental death benefit is the additional feature being offered by ICICI Prudential under iCare. But this additional feature comes at the payment of additional premium. So HDFC Click2Protect will be a better choice to go for in case you are looking for a plain vanilla term plan and not looking for accidental death benefit. Conclusion for HDFC Life, Birla Sunlife, ICICI Prudential trio Well as mentioned above, these 3 companies are best placed to offer you a good combination of high claim settlement ratio and low premiums. For someone who is looking for a plain vanilla term plan, HDFC Click2Protect is the one to go for and someone who is looking for Increasing Sum Assured and Rider options, Birla SunLife Protector Plus is the one to go for. 3) ING Life ING Term Life: ING Vysya has the 5th best claim settlement ratio of 90.49%. In the term plan category it is offering ING Term Life Plan with a premium of Rs . 12,265. The policy comes with a maximum tenure of 30 years. It also offers optional choice of riders : Accidental Death Benefit Rider and Accidental Death, Disability and Dismemberment Benefit . But the riders come for extra premium payment . Conclusion: The premium of Rs . 12,625 of ING Vysya (CSR 90.49%) is close to LICs (CSR 97.03%) premium of Rs . 12,850. So it will make sense for a person to go for LIC rather than ING Vysya. 4) Kotak Life, Bharti AXA, Metlife , Aviva, SBI Life, IndiaFirst Life All these 6 companies have claim settlement ratio ranging from high eighties (Kotak Life CSR 89.30%) to low eighties (IndiaFirst Life CSR 82.01%). Let us see what they have to offer. a) Kotak Life ePreferred Term: Kotak Lifes claim settlement ratio is at the higher end of the eighties at 89.30%. For a cover of above 25 lakhs Kotak offers ePreferred Term Plan and for a cover of below Rs. 25 lakhs Kotak offers eTerm Plan. The premium being charged by Kotak Life is Rs. 5487 which is lower than that of HDFC Click2Protect (5,625), Birla Sunlife Protector Plus (7,721) and ICICI Prudential iCare (6,783). The maximum tenure offered is 30 years. Kotak ePreferred Term offers Step-up and Step-down options. Step up option allows you to increase your insurance cover at certain important stages in life like marriage, purchase of house (maximum increase allowed in sum assured 50%), child birth , 1st, 3rd and 5th policy anniversary (maximum increase allowed in sum assured 25%). The step down option allows you to lower your cover. http://www.bachatkhata.com/2012/02/claim-settlement-ratio-for-life-insurance-companies-for-2010-11.html 5/24/2012 2:26:36 PM

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The premium being charged for iProtect is Rs. 4302, one of the lowest in the industry. The plan comes with a minimum cover of Rs. 25 lakhs and maximum tenure of 30 years. Conclusion: Well, if low premium is what you want, then you can go for this. But if you are looking for high claim settlement with slightly higher premiums and plain vanila term cover with no other features, then HDFC Click2Protect fits the bill. If low premium with reasonably high claim settlement ratio and step-up / step-down options is what you are looking for, then Kotak ePreferred plan fits the bill. c) Metlife MetProtect : The claim settlement ratio of Metlife is 85.43%. The premium being charged for MetProtect is Rs 5294 which is lower than that charged by HDFC, Birla Sunlife and ICICI Pru. The maximum policy tenure is 35 years and the minimum sum assured is 25 lakhs. It is a plain vanila term plan. Conclusion: With Metlife (CSR 85.43%) charging Rs . 5294 compared to HDFC (CSR 95.41%) charging Rs. 5,625, I will prefer to go with HDFC who is offering a better CSR by paying Rs 325 extra compared to Metlife. If you are looking for step-up / step down options then by paying Rs 200 extra go for Kotak Life as compared to Metlife. d) Aviva iLife: The claim settlement ratio of Aviva is 84.15% for 2010-11 down from 87.11% for 2009-10. The premium being charged for iLife is Rs.4436, which is one of the lowest in the industry. The minimum cover is Rs. 25 lakhs and the maximum policy tenure is 35 years. Conclusion: While the premium is one of the lowest, the claim settlement ratio (84.15%) is also lower than many other life insurance companies. I feel HDFC Click2Protect or Kotak ePreferred Term will be a better choice to go for. e) SBI Life Smart Shield: The claim settlement ratio of SBI Life is 82.24% which is 11th in the overall ranking of CSR for life insurance companies. SBI Smart Shield comes with a minimum sum assured of Rs. 25 lakhs and maximum tenure of 30 years. It comes with 4 variants: Level cover, increasing cover, decreasing cover (for loans) and family income protection option. In the event of death of the life assured, the family income protection option provides the family a monthly amount for the remaining policy tenure. This monthly amount is calculated as [(SA / Policy Term) * 12]. The policy also offers choice of riders : Accidental Death Benefit Rider , Accidental Total and Permanent Disability Rider and Accelerated Critical Illness cover option. Conclusion: While the features like increasing cover, family income protection option and riders are good, the low claim settlement ratio is not comforting. In comparison Birla Sunlife Protector Plus will be a better option as it offers similar options and also offers a much higher CSR. f) IndiaFirst Life AnyTime Plan: The claim settlement ratio of IndiaFirst Life is 82.01% and the premium being charged for AnyTime Plan is Rs. 6162. The minimum sum assured is Rs . 10 lakhs and maximum sum assured is Rs. 49 Lakhs and the maximum tenure is 30 years. Conclusion: It is a plain vanila term plan. HDFC Click2Protect will be a better choice in this category as it charges little lower premium but more importantly offers high CSR of 95.41% in comparison to 82.01% CSR of IndiaFirst. 5) Aegon Religare iTerm: Well, this company deserves a special mention as they were the first ones to introduce a low cost online term plan iTerm in 2009. It is because of them we see other companies also offering us low cost online term plans. So credit to them for that. Well coming to the analysis part, the CSR of Aegon Religare is 52.31% which is not very comforting. The premium being charged for iTerm is Rs. 4302 which is one of the lowest in the industry. The iTerm Plan offers interesting features. It comes will in-built Terminal Illness Cover at no extra cost. On diagnosis of any terminal illness the company pays 25% of the base sum assured and reduces the base sum assured accordingly. The plan offers a maximum tenure of 57 years, highest among all plans covered in this article. But this high tenure is subject to maximum maturity age of 75 years. So if you take the plan at the age of 25 years, then you can opt for a maximum tenure of 50 years, till the maturity age of 75 years. The website mentions, the plan covers all forms of death including terrorist attacks . Death by suicide within the 1st year of the policy is excluded, which is a standard exclusion in all policies. The plan offers choice of 3 riders: Accidental Death Rider, Waiver of Premium on Critical Illness Rider and Women Critical Illness Rider. Conclusion: Well the features like inbuilt terminal illness cover, maximum tenure of 57 years, choice of 3 riders and offcourse one of the lowest premiums in the industry are very interesting, the low CSR of 52.31% is a dampener. Overall Conclusion: Our overall conclusion is 1) If someone is looking for high CSR, low premium, plain vanilla term plan without any distinct features, then HDFC Click2Protect stands out in this category. 2) If someone is looking for high CSR, low premium, increased sum assured options, riders, then Birla SunLife Protector Plus (includes riders) and Kotak Life ePreferred Term (without riders) stand out in this category. 3) If someones need is for some specific feature, then a term plan can be looked for accordingly with that feature.

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