The life insurance claim settlement ratio for FY 2020-21 is presented below. These were published in the IRDA annual report in Dec 2021. The reader must appreciate that the claim settlement ratio (CSR) is not a life insurance claim acceptance probability!
Even if you make the mistake of assuming it represents a probability, a high CSR means very little because most companies have CSR = 95% (22 out of 24), and there is little to distinguish among them based on just this number.
Life Insurance Claim Settlement Ratio for FY 2020-21
Claim settlement ratio = the number of claims paid divided by the total number of death claims received.
Here the total no of claims = no of claims received in FY 2020-21 plus the no of claims pending at the start of the financial year.
| Total no of claims | Claims paid | Claims paid | |
| LIC | 946976 | 933889 | 98.62% |
| SBI Life | 34219 | 31855 | 93.09% |
| Max Life | 20052 | 19922 | 99.35% |
| HDFC | 16976 | 16639 | 98.01% |
| ICICI Prudential | 14829 | 14518 | 97.90% |
| Bajaj Allianz | 14333 | 14115 | 98.48% |
| Reliance Nippon | 9416 | 9274 | 98.49% |
| Aditya Birla Sun Life | 6474 | 6347 | 98.04% |
| PNB Met Life | 5315 | 5218 | 98.17% |
| Exide Life | 5052 | 4978 | 98.54% |
| Tata AIA | 4648 | 4556 | 98.02% |
| Kotak Mahindra | 4402 | 4336 | 98.50% |
| Shriram | 3686 | 3506 | 95.12% |
| India First | 2981 | 2886 | 96.81% |
| Canara HSBC OBC | 1899 | 1844 | 97.10% |
| Bharti Axa | 1893 | 1875 | 99.05% |
| Ageas Federal | 1805 | 1716 | 95.07% |
| Star Union | 1635 | 1569 | 95.96% |
| Future Generali | 1226 | 1163 | 94.86% |
| Aviva | 1055 | 1034 | 98.01% |
| Sahara | 885 | 860 | 97.18% |
| Pramerica Life | 647 | 638 | 98.61% |
| Edelweiss Tokio | 502 | 487 | 97.01% |
| Aegon | 401 | 398 | 99.25% |
Source: IRDA Annual report for FY 2020-21 page 161
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A high claim settlement ratio with a low number of claims is unreliable. So the above table is sorted in descending order of total claims.
The only reason a buyer is misguided to look at CSR data is that they do not want to pay a high premium to LIC and look for a “reliable private player”. We recommend looking at the total number of claims rather than just the CSR. Only six insurers have more than 10,000 claims. The market share of the others is therefore quite small.
| Insurer | Total no of claims FY 2020-21 | Total no of claims FY 2019-20 |
| LIC | 946976 | 758916 |
| SBI Life | 34219 | 22490 |
| Max Life | 20052 | 15463 |
| HDFC | 16976 | 12626 |
| ICICI Prudential | 14829 | 11460 |
| Bajaj Allianz | 14333 | 12127 |
The gulf between LIC and other insurers is quite evident here. The CSR data for the last two financial years for the “top six” is given below.
| Insurer | Claim Settlement Ratio FY 2020-21 | Claim Settlement Ratio FY 2019-20 |
| LIC | 98.62% | 96.69% |
| SBI Life | 93.09% | 94.52% |
| Max Life | 99.35% | 99.22% |
| HDFC | 98.01% | 99.07% |
| ICICI Prudential | 97.90% | 97.84% |
| Bajaj Allianz | 98.48% | 98.02% |
The Increase in claims from FY 2019-20 to 2020-21 for the top six and the corresponding change in CSR is shown below.
Change in CSR = CSR for FY 2020-21 minus CSR for FY 2019-20
| Increase in no of claims from FY 2019-20 to 2020-21 | Change in CSR | |
| LIC | 24.78% | 1.93% |
| SBI Life | 52.15% | -1.43% |
| Max Life | 29.68% | 0.13% |
| HDFC | 34.45% | -1.06% |
| ICICI Prudential | 29.40% | 0.06% |
| Bajaj Allianz | 18.19% | 0.46% |
There is not much change in CSR overall. Some numbers do stand out. The no of claims of LIC increased by 188060. The total number of claims for the other five in FY 2020-21 is only 100409! LIC has still increased its CSR by an impressive 1.93% – a good recovery considering recent data: Has LIC’s death claim settlement capacity reduced over the years?
Some people argue, “but most of those policies are small endowment policies”. This is undoubtedly true, but a behemoth of that size can easily handle the typical term insurance claim settlements of Rs. one crore. For those who want to stop analysing, LIC is the way to go as long as they don’t mind the higher premium. Disclosure: My Term insurance is from LIC.
Will things change after LIC goes public? It may; it may not. It will take years before the data reveals something conclusive. You can’t wait until then!
For those who to buy term insurance from a private player, then pick one from the other five:
- SBI Life
- Max Life
- HDFC
- ICICI Prudential
- Bajaj Allianz
Read the terms and conditions of the policy and “just pick one”. Don’t grow old analysing these policies too much. At the end of the day, it is a leap of faith (aka inky pinky ponky), so it is all about what makes you sleep at night better. You have already grown old by a few minutes reading this article. Do not put off your term life insurance purchase any longer!
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