Last Updated on December 29, 2021 at 6:05 pm
In the recently released IRDA annual report for FY 2019-2020, LIC’s claim settlement ratio (CSR, death claims) was 96.69%. Since FY 2016-2017, LIC’s CSR has been decreasing. Is this a cause for concern? We investigate.
Before we proceed, the reader needs to appreciate that the Claim settlement ratio is not a probability of life insurance claim acceptance! Studying the CSR history of LIC can give insights into how the corporation has reacted to an increase in the number of claims. The results of this study have little bearing on individual claims.
The latest CSR data is available here: IRDA Life Insurance Claim Settlement Ratio Data for 2021. LIC’s CSR reduced from 98.33% in 2015-16 to 96.69% in FY 2019-2020. From the undisputed leader in CSR, the corporation has dropped several places down.
LIC’s claim settlement ratio history
| Financial year ending | CSR | Total Claims |
| 2020 | ||
To understand what is happening, we must appreciate the scale of operations of LIC. Even in 2019-2020, the total number of claims received and the total number of claims paid by LIC is about 6.5 times the corresponding numbers of the entire private life insurance sector.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
The highest CSR in the above data set is 98.33% in FY 2015-16. The lowest is 96.48% in FY 2008-09. If LIC’s CSR in FY 2015-16 were 96.48%, it would mean a rejection of 14,088 extra claims – a mere 1.85% of the total claims received. Even in FY 2019-20, only two private players have total claims received or paid more than 14K claims!
IN FY 2019-2020, the number of claims received is 3067 less than what was received in FY 2015-16 (which has the highest CSR in the above data set). However, claims paid out in FY 2019-20 was 15440 less than FY 2015-16.
Since 2011, LIC has received more than 7 lakh death claims each financial year. If we normalize the total claims and claims paid for FY 2006-07 (an arbitrary choice), we get the following table.
| Financial year ending | Total Claims in each FY divided by total claims in FY 2006-07 | Claims paid in each FY divided by claims paid in FY 2006-07 |
| 2020 | 1.24 | 1.24 |
| 2019 | 1.23 | 1.24 |
| 2018 | 1.21 | 1.22 |
| 2017 | 1.26 | 1.28 |
| 2016 | 1.25 | 1.26 |
| 2015 | 1.24 | 1.25 |
| 2014 | 1.24 | 1.26 |
| 2013 | 1.23 | 1.24 |
| 2012 | 1.19 | 1.20 |
| 2011 | 1.21 | 1.21 |
| 2010 | 1.11 | 1.10 |
| 2009 | 0.97 | 0.95 |
| 2008 | 0.90 | 0.90 |
| 2007 | 1.00 | 1.00 |
For each FY ending 2011, the total no of claims received about 20% or more than the number for FY 2006-07. The no of claims paid out has proportionally increased, keeping pace with the increase in claims received and sometimes higher.
To answer the titular question, “Has LIC’s death claim settlement capacity reduced over the years?” the answer is no relative to FY 2006-2007. The answer is yes relative to FY 2013-14
This is, however, not a cause for concern as an abrupt increase in claims received (14.6% in FY ending 2010 and 9.2% in FY ending 2011) led to a proportional increase in claims paid out (15.7% in FY ending 2010 and 9.7% in FY ending 2011).
The data for FY 2019-2020 (red arrow) is an outlier, but at the time of writing, that could be a one-off and not a trend. The data for FY ending 2009 (3rd data point from right in the graph) was even more of an outlier.
Therefore, there is no evidence to show that LIC’s ability to settle claims has reduced over the years at the time of writing. The changes in CSR could merely be fluctuations. We like to reiterate that the results of this study have little bearing on individual claims.
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 7000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 2,500 investors and advisors use this!
Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)