Claim Settlement Ratio for Life Insurance Companies for 2012-13

by Gopal Gidwani on May 25, 2014 · 0 comments

in Financial Planning

Claim Settlement Ratio for Life Insurance Companies for 2013-14
Click here to read about latest claim settlement ratio for 2013-14
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For people looking to buy a term insurance plan; annual premium charged for the term plan and claim settlement ratio of the life insurance company are two important considerations apart from other important considerations like their specific need, customer service of the company, product features etc.

In this article we present you with the comparison of claim settlement ratios of life insurance companies for the last 4 years (2009-10, 2010-11,2011-12 and 2012-13) along with the premiums charged by them for their term insurance plans. We also present a comparison of the features of various term insurance plans offered by different companies.

Claim Settlement Ratio (CSR): In very simple terms CSR refers to the number of claims that were settled by the insurance company out of every 100 claim requests it received in that particular year. So for example if the claim settlement ratio of LIC for the year 2012-13 is 97.73%, in simple terms it means for every 100 claims that LIC received in 2012-13, it settled 97.73 claims. Now this does not mean all the remaining 2.27 claims were rejected. Some may be pending for inquiry, while some may be rejected due to various reasons.

In the below table let us look at the comparison of claim settlement ratios for life insurance companies for the last 4 years (2009-10, 2010-11 ,2011-12 and 2012-13) and the premiums charged by these companies for their term plans.

InsurerCSR for 2012-13CSR for 2011-12CSR for 2010-11CSR for 2009-10Policy NamePremium
LIC97.7397.4297.0396.54e-Term10,225
ICICI Prudential96.2996.5394.6190.17iCare II11,618
HDFC Life95.7696.1795.4191.14Click2Protect8,146
SBI Life94.4195.4882.2483.27eShield8,922
Max Life94.2589.8477.9665.51Online Term Plan5,618
Kotak Life92.0492.189.386.97ePreferred Term8,427
Star Union Dai- Chi89.7086.1680.6958.33
Bharti AXA89.4887.787.1777.8eProtect5,337
Bajaj Allianz88.6790.6188.6988.19
Canara HSBC88.4480.5871.0238.71
Aviva87.7189.5584.1587.11
Reliance Life86.4584.5881.3689.07
Sahara84.7177.9753.2363.06
TATA AIA84.4683.9481.9378.17
ING Vysya Life83.9488.8290.4989.3
PNB Metlife83.8781.3785.4382.54
Birla Sunlife82.5590.9494.6689.09
IDBI Federal80.0667.4664.9249.52
IndiaFirst71.4082.2382.0153.85
Future Generali70.5368.0650.5238.85
Shriram67.3564.9355.6939.54
Aegon Religare66.8266.0652.3148iTerm5,393
Edelweiss Tokio45.45100NANA
DLF Pramerica27.0424.4651.2240
Private Total88.6589.3486.0584.88
Industry Total96.4196.2695.5895.24

Please note:

a) The premiums shown in the above table are for a 33 year old male (non-smoker) for a sum assured of Rs. 50 lakhs for a term of 30 years.
b) The claim settlement ratio data for respective years has been taken from the IRDA Annual Reports for respective years
c) The claim settlement ratio is overall for the company for all products taken together and not just for term plans. The CSR for a specific product / plan is not available from the IRDA Annual Report.
d) All premiums amounts have been taken from the respective company websites and may be subject to changes from time-to-time.
e) All the premium amounts mentioned are inclusive of service tax
f) These premium amounts are as on May 2014. 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 from time-to-time.
g) Last but not the least; we are not representing any particular insurance company.

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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. We try to help you strike a balance between the two.

For the simplicity of understanding we group insurance companies offering term into the following categories:
a) High Claim Settlement Ratio (CSR) with High Premium: From the above premium table we can see that LIC and ICICI Prudential fall in this category.

LIC has the highest claim settlement ratio for 2012-13 at 97.73%. This in very simple terms means for every 100 claims that LIC received in the year 2012-13 it settled 97.73 claims. This is indeed a great achievement and kudos to LIC for doing it. Now that does not mean the remaining 2.27 claims (100 – 97.73) were rejected. Some claims may still be in the process of settlement whereas some may have been rejected with reasons. LIC also had the highest claim settlement ratio for the year 2011-12, 2010-11 and 2009-10.

The premium being charged by LIC for its online term plan eTerm (Rs. 10,225) is the second highest in our premium comparison table among premiums charged by other insurance companies for their term plans. This premium amount is almost close to double the premium charged by some other insurance companies for their term plans.

The premium being charged by ICICI Prudential for its online term plan iCare II (Rs. 11,618) is the highest in our premium comparison table.

b) Lower Claim Settlement Ratio (CSR) with Low Premium: There are companies like Aegon Religare (iTerm – Rs. 5,393), Bharti Axa (eProtect – Rs. 5,337) that offer term plans at the lowest possible price as compared to some other companies. But the claim settlement ratio of these companies: Aegon Religare (CSR – 66.82%), Bharti Axa (CSR – 89.48% is lower than some other companies in the same segment. These two companies have improved their CSR in the last 4 years, but they still have some catching up to do as compared to higher CSR of some other companies.

c) High Claim Settlement Ratio (CSR) with Low Premium: This ideal combination of high CSR with low premium is what most people look for while buying term plans. The companies in this category try to strike a good balance between high CSR and low premium. In this category we have companies like:

i) HDFC Life (CSR – 95.76%) that offers Click2Protect (Rs. 8,146)
ii) SBI Life (CSR – 94.41%) that offers eShield (Rs. 8,922)
iii) Max Life (CSR – 94.25%) that offers Online Term Plan (Rs. 5,618)
iv) Kotak Life (CSR – 92.04%) that offers ePreferred Term (Rs. 8,427)

With high CSR and competitive premiums and other product features an individual will have compelling reasons to buy term insurance from these companies. Since there is not much difference between CSR and premiums of these companies, the product features and customer service of the company can be a key differentiator. We will discuss the features of products offered by these companies later in the article. In this category before zeroing on the final plan, the individual should look at his / her need and check the features of plans offered and accordingly take a decision.

We will put all other companies that don’t fall in any of the above three categories into the fourth category.

Now let us compare the features of the term plans offered by some of the above mentioned insurance companies. In the table given below we have tried to summarise the features of various term plans offered by various insurance companies.

InsurerPolicy NamePolicy TenureMaximum age at Policy ExpiryMinimum Sum AssuredMaximum Sum AssuredRiders / Variants
LICe-Term10 – 35 years75 years25 lakhsSubject to underwritingNA
ICICI PrudentialiCare II5 – 30 years65 yearsAs per minimum premiumSubject to underwritingAccidental death benefit available as a variant
HDFC LifeClick2Protect10 – 30 years65 years10 lakhs10 croresNA
SBI LifeeShield5 – 30 years70 years20 lakhsSubject to underwritingLevel cover, Level cover with ADB, Increasing cover, Increasing cover with ADB
Kotak LifeePreferred Term5 – 30 years70 years25 lakhsSubject to underwritingLevel cover option, Cover Step-up option and Cover Step-down option
Max LifeOnline Term Plan10 – 35 years70 years25 lakhs100 croresBasic life cover, life cover + monthly income, life cover + increasing monthly income. Comprehensive Accident Benefit Rider
Bharti AXAeProtect10 – 30 years75 years25 lakhsDaily Hospital Cash Benefit Rider
Aegon ReligareiTerm5 – 40 years or upto 75 years75 years10 lakhsSubject to UnderwritingAccidental Death, Waiver of Premium on Critical Illness, Women Critical Illness Rider

Now let us look at each of these policies in details.

LIC – e-Term: The much awaited on-line term plan from LIC is finally here. The minimum tenure of this plan is 10 years and the maximum tenure is 35 years. The minimum sum assured offered under this plan is Rs. 25 Lakhs for the aggregate category and Rs. 50 lakhs for the non-smoker category. There is no upper cap on the sum assured. There are no riders available with this plan. There are no variants in this plan. The premium can be paid only on an annual basis i.e. there is no half-yearly, quarterly or monthly option. For more details on this plan you may write to LIC on online_dmkt@licindia.com or call their toll free number at 1800-22-7717.

Though LIC has maintained the highest claim settlement ratio in the last 4 years, the premium charged by LIC for e-Term is higher than the premiums charged by many other insurance companies for term plans. But the premium for e-Term is certainly lower than LIC’s offline term plan “Amulya Jeevan”.

Our Take: Following people may go for LIC’s e-Term plan:
i) People for whom the claim settlement ratio is more important than the little higher premium charged by LIC as compared to the lower premium of other insurance companies
ii) People for whom a plain vanilla term insurance plan is the requirement
iii) People who have preference for a company backed by the Government of India
iv) People who have all the above requirements or any combination of the above requirements

Our Thumbs Up to this plan.

ICICI Prudential – iCare II: The minimum tenure of this plan is 5 years and the maximum tenure is 30 years. The minimum sum assured depends on the minimum premium (Rs. 2,400 excluding service tax) and there is no limit on maximum sum assured. There are no riders offered with this plan. Premium can be paid annually, half-yearly, monthly or one-time.

This plan comes in 2 variants:

i) iCare II Option I (Basic plan): Premium is Rs. 11618 for a cover of Rs. 50 lakhs for a 33 year old individual for tenure of 30 years.

ii) iCare II Option II (Accidental death): Additional amount of Sum Assured as chosen by you (subject to a maximum Rs. 50 lakhs) for accidental death. Premium is Rs. 14371 for a cover of Rs. 50 lakhs (with additional sum assured of Rs. 50 lakhs for accidental death) for a 33 year old individual for tenure of 30 years.

HDFC Life, SBI Life, Kotak Life and Max Life

As we have seen above, these companies offer a good combination of higher claim settlement ratio with lower premiums.  There is less to differentiate at the CSR level and the premium level, but the features of the product / plan offered can be a key differentiator. Let us have a look at the features of products offered by these companies.

HDFC Life – Click2Protect: The minimum tenure of this plan is 10 years and maximum tenure is 30 years. The minimum sum assured is 10 lakhs and the maximum sum assured is 10 crores. There are no riders offered with this plan. There are no variants offered under this plan. It is a simple plain vanilla term plan.

SBI Life – eShield: The minimum tenure of this plan is 5 years and the maximum tenure is 30 years. The minimum sum assured is 20 lakhs and there is no cap on the maximum sum assured. The minimum premium under this plan can be Rs. 3500 and the premium payment frequency can be annual only. The plan comes in four variants:

i) Level Cover: For a 33 year old person for a cover of Rs. 50 Lakhs for tenure of 30 years, the annual premium comes to Rs. 8922.
ii) Level Cover with Accidental Death Benefit: For a 33 year old person for a cover of Rs. 50 Lakhs (with additional accidental death benefit of Rs. 50 lakhs) for tenure of 30 years, the annual premium comes to Rs. 11057.
iii) Increasing Cover: In this option the basic sum assured is increased by 10% (@simple rate and NOT compound rate) at the end of every 5th policy year, without any increase in annual premium. For a 33 year old person for a cover of Rs. 50 Lakhs (increasing cover option) for tenure of 30 years, the annual premium comes to Rs. 11,186.
iv) Increasing Cover with Accidental Death Benefit: For a 33 year old person for an increasing cover of Rs. 50 Lakhs (with additional accidental death benefit of Rs. 50 lakhs) for tenure of 30 years, the annual premium comes to Rs. 13,321.

The Accidental Death Benefit amount will be equal to the basic sum assured or a maximum of Rs. 50 Lakhs whichever is lower.

Kotak Life – ePreferred: The minimum tenure of this plan is 5 years and the maximum tenure is 30 years. The minimum sum assured is 25 lakhs and the maximum sum assured is subject to underwriting. Premium can be paid yearly, half-yearly, quarterly or monthly. Minimum annual premium should be Rs. 1800. The plan comes in 3 variants: Level cover, Step-up option and Step-Down option.

i) Level cover option: The sum assured stays the same throughout the policy tenure.
ii) Step-up option: During a major event like marriage, house purchase the original sum assured can be increased by 50%. During events like 1st, 3rd and 5th policy anniversary, child birth the original sum assured can be increased by 25%. The step-up option can be exercised at one or more of the events listed above. An additional premium will be charged for increase in sum assured.
iii) Step-down option: The life assured can lower the sum assured by exercising the step-down option. The premium is re-calculated based on the revised sum assured. There is a charge of Rs. 500, levied on each step-down request.

Max Life Insurance – Online Term Plan: The plan can be bought for a minimum of 10 years and a maximum of 35 years. The minimum sum assured can be Rs. 25 lakhs and the maximum can be Rs. 100 crores. The premium payment frequency can be annual only. The plan comes with the option of ‘Comprehensive Accident Benefit Rider’. The rider sum assured can be equal to the base plan sum assured or Rs. 1 crore, whichever is lower.

The Online Term Plan comes in 3 different variants:

i) Max Life Online Term Plan Basic Life Cover: Under this plan, the sum assured is provided as lumpsum on the death of the life insured. For a 33 year old individual for a cover of Rs. 50 lakhs for 30 years, the annual premium comes to Rs. 5618 (without accident benefit rider) and Rs. 7246 (with an accident benefit rider of Rs. 23 lakhs).

ii) Max Life Online Term Plan Life Cover + Monthly Income: Under this plan, a fixed sum assured is provided as lumpsum and a fixed monthly income is provided to take care of any liability and provide a steady income to family. On death 100% of the original sum assured is paid. Over the next 10 years, 0.4% of the original sum assured is paid every month. Thus the total payout is 148% of the original sum assured.

For example, let us assume the chosen sum assured is Rs. 1 crore. On the death of the life insured, Rs. 1 crore will be paid to the nominee. Over the next 10 years, Rs. 40,000 (0.4% of Rs. 1 crore) will be paid every month to the nominee, resulting in a payout of Rs. 48 lakhs over the 10 years. Thus the total payout under the policy will be Rs. 1.48 crores (148% of the sum assured of Rs. 1 crore).

For a 33 year old individual for a cover of Rs. 50 lakhs (and monthly income of Rs. 20,000 for 10 years after death) for 30 years, the annual premium comes to Rs. 7472 (without accident benefit rider) and Rs. 9666 (with an accident benefit rider of Rs. 31 lakhs).

iii) Max Life Online Term Plan Life Cover + Increasing Monthly Income: Under this plan, a fixed sum assured is provided as lumpsum and an increasing monthly income is provided to handle any liability and take care of increasing living costs and expenses. The monthly income increases every year by 10% simple rate of interest of the first year monthly income.

For example, let us assume the chosen sum assured is Rs. 1 crore. On the death of the life insured, Rs. 1 crore will be paid to the nominee. Over the next 10 years, Rs. 40,000 (increasing annually by 10% simple rate of interest of the first year monthly income) will be paid every month to the nominee. Thus the monthly payout in the 1st year will be Rs. 40,000, in the 2nd year will be Rs. 44,000, in the third year will be Rs. 48,000, and in the 4th year will be Rs. 52,000 etc. and so on. This will result in a payout of Rs. 69.6 Lakhs over the 10 year period. Thus the total payout under the policy will be Rs. 1.696 crores (169.6% of the sum assured of Rs. 1 crore).

For a 33 year old individual for a cover of Rs. 50 lakhs (and for 10 years after death, a monthly income of Rs. 20,000 increasing @10% simple rate of interest of first year monthly income) for 30 years, the annual premium comes to Rs. 8146 (without accident benefit rider) and Rs. 10,553 (with an accident benefit rider of Rs. 34 lakhs).

Our take on the above 4 plans: Well, all 4 plans are worth considering depending on the individual’s requirement.

i) For some who is looking for a plain vanilla term plan with no riders, no variants, high claim settlement ratio then ‘Click2Protect’ from HDFC Life fits the requirement and is a good choice.

ii) eShield from SBI Life offers good choice of variants like Level cover, Level cover with ADB, Increasing cover, Increasing cover with ADB. But similar options are offered by Kotak Life’s ePreferred Term. Infact the Kotak ePreferred plan also offers the step-down option. Also the premium charged by the Kotak ePreferred plan is a little lower than the SBI Life eShield plan.  So one may choose Kotak ePreferred plan over SBI Life eShield plan

iii) For someone who is looking for a Step-up option to increase insurance cover at certain important stages in life like marriage, purchase of house, child birth, 1st, 3rd and 5th policy anniversary etc. or Step-down option at a later stage in life, ePreferred from Kotak Life fits the requirement and is a good choice.

iv) Online Term Plan from Max life offers a good choice of variants like basic life cover, life cover + monthly income, life cover + increasing monthly income. Also the accident benefit rider can be availed with these variants. The premium charged by Max Life for a basic cover is Rs. 5618, which is the lowest among the 4 companies. The combination of high CSR (94.25%), low premium, good variants make the Online Term Plan from Max Life one of the best propositions in the online term plan space. At a premium of Rs. 5,618, the plan comes at a discount of almost 50% compared to LIC and ICICI Prudential. Our Thumbs Up to this plan.

Aegon Religare – iTerm: iTerm was the first online plan in the online term insurance product segment, introduced in 2009. iTerm from Aegon Religare forced other insurance companies to jump into the online insurance space and compete with iTerm by lowering premiums. So credit to iTerm for the lower premiums that we are paying today.

iTerm offers the longest tenure of 40 years or up to age of 75 years. The minimum cover amount is Rs. 10 lakhs and the maximum is subject to underwriting. The premium payment frequency of this plan can be annual or single (one time) premium.

The plan offers choice of riders like

i) Accidental Death Benefit Rider
ii) Waiver of Premium (WoP) on Critical Illness: This rider covers four critical illnesses, namely: Coronary Artery Bypass Surgery, Heart Attack, Stroke and Cancer. During the tenure of the plan, if the life insured is diagnosed with any of the above critical illness, then the premium for the remaining policy tenure is waived off.
iii) Women Critical Illness: Under this rider, if the life insured (female) has been diagnosed with any critical illness that is covered under this rider, then a certain percentage of the base sum assured will be paid.

The plan also comes with built-in Terminal Illness Cover. 25% of the base sum assured is paid on diagnosis of any terminal illness and the base sum assured gets reduced accordingly.

For a 33 year old individual for a cover of Rs. 50 lakhs for 30 years, the annual premium comes to Rs. 5393.

Our Take: Well, the above mentioned interesting features like long tenure and the very low premium of Rs. 5393 are compelling reasons to buy the plan, the low CSR of 66.82% is a spoilsport. Aegon Religare has improved its CSR from 48% to the current 66.826% in the last 4 years. But with that improved CSR also Aegon Religare is in the bottom 5 of the CSR Table. If Aegon Religare improves it CSR to above 90%, the iTerm can surely compete very strongly with other term plans of insurance companies. But for the time being it is wait and watch mode on this one.

Some Important Tips:

a) The proposer / applicant at the time of purchasing a term insurance plan or any other insurance plan from any life insurance company should ensure they provide complete and correct information relating to all material facts. This will ensure that there are no problems at the time of claim settlement.

b) While selecting a term plan, it should be remembered that an insurance company might offer different variants of same plan. The premium amount for each variant of the plan will be different.

c) Insurance companies offer different riders along with term insurance plans. Each rider is charged for separately with some additional amount.

Hence with the above points in mind one needs to be very clear of his/her requirement at the very beginning itself and accordingly examine the features and benefits being offered. Terms and conditions of the policy need to be carefully studied before agreeing to them.

And finally we sincerely hope your search for a term plan and the dilemma of striking a fine balance between high claim settlement ratio and lower premium gets resolved to a certain extent with this article. We would love to hear from you on this or any other query!!!

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