Global Courant
As we know, there are 20 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 admitted to the life insurance market. The private life companies position themselves on customer friendliness, wider range of products etc. While LIC maintains its positioning of trust, experience and government support. One of the most important parameters by which a life insurance company should be judged is their payment behavior. At the same time, we should note that as life has become more of a savings and investment product, the returns they generate may be more important than claims payout ratios. Nevertheless, the claim record is certainly not a variable to be ignored. Below is a table of the rejection rates of the largest life insurance companies in 2009-2010:
Life insurance: percentage of rejected claims (%)
LIC: 1.21%
Aviva: 9.75%
Bajaj Alliance: 5.2%
Birla SunLife: 10.62%
HDFC lifespan: 4.67%
ICICI Prudential: 3.27%
ING Vysha: 4.26%
Kotak Mahindra: 4.29%
Max living in New York: 12.31%
MetLife: 5.94%
Lifetime Dependency:7.05%
SBI Lifespan: 14.75%
Tata AIG: 12.3%
An important observation from the table above is that LICs have the lowest claim rejection rate, implying that their track record is the best in terms of claims payment. At the same time, the very high rate of claim rejections from SBI Life and Max New York Life certainly comes as a surprise.
However, it should be noted again that with Unit Linked products that life insurance companies aggressively promote (or at least advertised until September 2010), the return on the fund may be a more important variable than the payout ratio (or rejection). However, for claims companies, which offer pure protection/insurance products with no savings or investment component, claims payment is the critical variable, along with the speed of claim processing.
Now let’s look at the claims ratios of the claims companies:
Non-life insurance company: Incurred claims ratio
New India Insurance: 89%
Eastern Insurance: 99.69%
Insurance United India: 78.62%
National Insurance: 99.16%
Royal Sundaram: 68.95%
General Insurance Reliance: 77.3%
Iffco Tokyo Insurance: 83.44%
Tata AIG: 60.54%
ICICI Lombard: 85.35%
Bajaj Alliance: 71.9%
HDFC Ergo: 80.73%
Bharti Axa:104%%
One data point that stands out from the above is that Tata AIG General Insurance seems to be the best quality buy from an underwriting point of view, while Bharti Axa’s payout ratio seems to be quite high. In addition, the payout ratio of public insurers is generally higher than that of private non-life insurers.
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