State-owned Life Insurance Corporation’s (LIC) claim repudiation ratio — the claims which are rejected — is lower than 1%. Sources at Insurance Regulatory and Development Authority (Irda) have found out that private sector life insurers, on the other hand, have a repudiation ratio of over 13%.
LIC’s death claims were being settled within 21 days and the outstanding claims as on March 2004 were at their lowest ever at 0.13%, said an LIC official. A low repudiation ratio indicates that the insurer is paying all claims which are payable under the policy’s terms.
However, the settlement of any insurance claim also involves interpretation of a lot of technical conditions which are generally used by the insurers to reject the claims. “At LIC, we normally do not get into too much technicalities considering the fact that most policyholders are not so rich,” conceded a senior official of the Corporation.
A high repudiation ratio may also explain the fact that private life insurers have low claim records in the post-liberalisation period. “Our claim ratio has remained low and in line with our projection for the Indian market,” said a Delhi-based life insurance company.
The private life insurers have maintained that the Indian life insurance market is a profitable one and two of the life insurance companies — Bajaj Allianz Life Insurance and Max New York Life Insurance — have already announced profits within the first three years of their operation.
Globally, life insurance companies take six to seven years to break-even. LIC has centralised its claim processing system to manage over Rs 20,000 crore worth of claims out of the one crore policies annually. It is making efforts to bring its outstanding claims ratio to below 0.02% in survival benefits (SB) and maturity and 1.5% in death claims.
“No claim will remain outstanding for more than 30 days and beyond this limit, such cases will be reported to the marketing manager. Investigations will be completed within seven days,” said the LIC official.