One important thing that lot of people take into consideration nowadays is the c laim settlement ratio of the

insurance company and the timeframe taken to settle the claim. However it really depends on personal choice of an individual about what matters to him the most. It makes sense for people to invest in a plan of a company that has a good claim settlement ratio and a company that has a good track record of settling the cla im in a reasonable timeframe of filing the claim with the company. After all wha t good is an insurance plan during your lifetime if your beneficiaries are not a ble to settle the claim with the insurance company within a reasonable time in y our absence. However, every convenience nowadays comes for a price. If you look at the data p roduced by IRDA (Insurance Regulatory and Development Authority) for the year 20 09-10, many facts like these become clearer to us. What is claim settlement ratio? In very simple words claim settlement ratio is the number of claims settled for every 100 claims received by the life insurance company. For example if an insur ance company has received 100 claims in a year and it has settled 98 claims out of it, then the claim settlement ratio will be 98%. Higher is the claim settleme nt ratio for the company, the better. Industry average claim settlement ratio If you look at just a comparison between private insurance players and LIC in de ath claim settlement, it becomes clear that LIC s death claim settlement ratio is almost 11% better than the average of all private players taken together. Insurer Total claims Claims Paid Claims pending Claims repudiated and wr itten back LIC 100 96.54 1.41 2.05 Private Insurers 100 84.88 7.48 7.64 Total 100 95.25 1.93 0.75 (Data obtained from IRDA Annual Report 2009-10) While LIC settled 96.54% claims in the year 2009-10, private players settled onl y 84.88% of the total claims. One needs to see how well established the insurance company is. As the operation s of the insurance company get stabilized, their member base and investment base gets stronger. Life insurance is a very capital intensive business with long br eak even periods. For the year 2009-10, along with LIC another seven insurance c ompanies reported profits which show their operations have stabilised and now th ese companies are strong enough to handle large number of customers. Although most things look positive for LIC, one fact is that their plans are not very cost competitive. The premiums are one of the highest in the case of LIC. Because of this very fact, many people prefer to go for private insurance covers rather than going for an LIC cover. Since late 2009 with online term plans comi ng into the market, people can now take insurance cover for a higher amount for very low premiums. Many who do not understand the importance of high death claim settlement ratio or are not aware of it go for these insurance covers. However, there are still a bigger number of customers who believe in investing in insure rs who have better claim settlement statistics rather and are ready to pay a hig her price for it as well. Detailed analysis of annual claim settlement ratio for individual companies Data as shown in the chart is obtained from IRDA website as published in their a nnual report 2009-10.

In the chart the insurance companies have been arranged according to their death claim settlement ratio. LIC as seen earlier tops this list. The point to note h ere is that even between the top two insurers, there is a gap of 5% in their cla im settlement ratios. This means that LIC is still much ahead in claim settlemen t than the rest of the private players. Also, LIC has still the biggest customer base. Total claims received by LIC was 6,77,374 as compared to the next player being Bajaj Allianz receiving only 23,04 0 for the year 2009-10 and ICICI prudential following it by a claims figure of 1 6,057. There is a massive difference between LIC and other players and indicates that LIC still has more than 50% of the customer base as far as life insurance industry is concerned. In order to avoid hassles at the time of claim settlement it is better to declar e all information in the proposal form like date of birth, age, medical history, habits correctly. The proposer should not hide any material information at the time of taking the policy. During its claim investigation if the insurer finds o ut that there was any type of misrepresentation from the policyholder at the tim e of taking the policy, the insurance company may reject the claim and declare t he policy as null and void and forfeit all the premiums. Information published in IRDA website also shows that Aegon Religare settled onl y 24 claims out of the 50 claims it received in the year 2009-10 ending the year with a claim settlement ratio of 48%. Comparison of premiums between LIC and private insurers One thing that goes in favour of the private insurance companies is the pricing of their products. If we study the premiums charged by private insurance compani es for term plans as compared to the premium charged by LIC for its term plan Je evan Amulya, in some cases the premiums of private life insurers are as less as 50% compared to the premium charged by LIC. So there is a huge disparity in the premiums charged by private insurers and LIC. While LIC still commands a major m arket share, private insurers are using the low premium bait to woo customers to wards them. Even though there are 23 players operating in the market fighting fo r a share of the customer s wallet, due to the huge under penetration of insurance in India and the huge untapped opportunity there is room for everyone to attrac t new customers rather than competing for each other s customers. Conclusion Many people are still very sceptical of buying insurance from private life insur ance companies. They would rather go for LIC only. LIC still enjoying the bigges t trust factor among people even though the competition around it is very stiff. Death claim settlement ratio is a key factor (apart from the other factors disc ussed above) that helps people in selecting the right insurance company for buyi ng an insurance cover. However in the end, decision is personal.