Life Insurance Claim Settlement Ratio for FY 2020-21

Published: January 13, 2022 at 7:00 am

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 claimsClaims paidClaims paid
LIC94697693388998.62%
SBI Life342193185593.09%
Max Life200521992299.35%
HDFC169761663998.01%
ICICI Prudential148291451897.90%
Bajaj Allianz143331411598.48%
Reliance Nippon9416927498.49%
Aditya Birla Sun Life6474634798.04%
PNB Met Life5315521898.17%
Exide Life5052497898.54%
Tata AIA4648455698.02%
Kotak Mahindra4402433698.50%
Shriram3686350695.12%
India First2981288696.81%
Canara HSBC OBC1899184497.10%
Bharti Axa1893187599.05%
Ageas Federal1805171695.07%
Star Union1635156995.96%
Future Generali1226116394.86%
Aviva1055103498.01%
Sahara88586097.18%
Pramerica Life64763898.61%
Edelweiss Tokio50248797.01%
Aegon40139899.25%

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.

InsurerTotal no of claims  FY 2020-21Total no of claims  FY 2019-20
LIC946976758916
SBI Life3421922490
Max Life2005215463
HDFC1697612626
ICICI Prudential1482911460
Bajaj Allianz1433312127

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.

InsurerClaim Settlement Ratio  FY 2020-21Claim Settlement Ratio  FY 2019-20
LIC98.62%96.69%
SBI Life93.09%94.52%
Max Life99.35%99.22%
HDFC98.01%99.07%
ICICI Prudential97.90%97.84%
Bajaj Allianz98.48%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 2020-21Change in CSR
LIC24.78%1.93%
SBI Life52.15%-1.43%
Max Life29.68%0.13%
HDFC34.45%-1.06%
ICICI Prudential29.40%0.06%
Bajaj Allianz18.19%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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