As we know, there are 20 odd private life insurance companies in India, and there is LIC which is a public sector company. LIC is the 800 pound gorilla, managing to hold on to about 75% market share even 10 years after private companies have been allowed into the life insurance space. The private life companies position themselves on being more customer friendly, wider array of products etc while LIC holds on to its positioning of trust, experience and government backing. One of the key parameters on which to judge a life insurance company is their claims payment record. At the same time, we must note that given that life has become more of a savings and investment product, the returns that they provide are perhaps more important than claims payout ratios. Nevertheless, claims record is definitely not a variable to be ignored. A table illustrating the claims rejection percentages of the top life insurance companies in 2009-10 is presented below:
Life Companies: Claims rejection ratio (%)
Bajaj Allianz: 5.2%
Birla SunLife: 10.62%
HDFC Life: 4.67%
ICICI Prudential: 3.27%
ING Vysya: 4.26%
Max New York Life:12.31%
Tata AIG: 12.3%
An important observation from the above table is that the claims rejection ratio of LIC is the lowest, thus implying that their record is the best as far as claims payment is concerned. At the same time, the very high percentage of claims rejection of SBI Life and Max New York Life surely comes in as a surprise.
It must however be noted once again that in Unit Linked products that life organisations promote aggressively (or at least was promoting till Sep 2010), the returns earned on the fund is perhaps a more important variable than the claims payment (or rejection) ratio. However, for non life companies, which offer pure protection/insurance products with no savings or investment component, claims payment is the crucial variable along with the speed of processing of claims.
Let us now look at the incurred claims ratios of the non-life companies:
Non-Life Insurance Company: Incurred claims ratio
New India Assurance: 89%
Oriental Insurance: 99.69%
United India Insurance: 78.62%
National Insurance: 99.16%
Royal Sundaram: 68.95%
Reliance General Insurance:77.3%
Iffco Tokio Insurance:83.44%
Tata AIG: 60.54%
ICICI Lombard: 85.35%
HDFC Ergo: 80.73%
One data point that stands out from above is that Tata AIG General Insurance seems to be sourcing the best quality business from the underwriting point of view, whereas the claims payment ratio of Bharti Axa seems to be quite high. Alo,the claims payment ratio of the public insurers, at an overall level, is higher than that of the private non life insurers.