Life Insurance – Claim Settlement Ratio – 2010-11

Claim Settlement Ratio is probably the most important factor while buying insurance. This becomes even more critical for Life Insurance as you would like your dependents to run pillar to post to claim your sum assured in case of unfortunate death. The recently published Insurance Regulatory And Development Authority - IRDA Annual report 2010-11 has the settlement ratio for the following life insurance companies in India.

LIC	Metlife	Canara HSBC
HDFC Life	Aviva	IDBI Fedral
Birla Sunlife	SBI Life	Shriram
ICICI Prudential	India First	Sahara
ING Life	Tata AIG	Aegon Religare
Kotak Mahindra	Reliance Life	DLF Pramerica
Bajaj Allianz	Star Union Dai-ichi Life	Future Generali
Bharti AXA	Max New York

Claim Settlement Ratio :-

The table below gives the Settlement ratio for the above Life Insurance Companies:

As you can see LIC (Life Insurance Corporation) has the best Claim Settlement Ratio of more than 97% while Future Generali has the worst payout ratio of 50.5%.  But before you focus too much on these numbers, here are a few points you need to think about:

Life insurance companies have a very high rate of rejection in the ‘early claims’ – so if there is a claim made within 2 years of taking the policy, there is a far greater chance of it being rejected. So all the companies which have started operation in last five years would obviously have low settlement ratio.

The data does not tell what kind of claims is being talked about? Is it only death claim or also included maturity claim. As you are aware that maturity claims cannot be anyway be rejected, so its unfair to club both death claim and maturity claim. IRDA should make provision for publishing this separately.

So read the above Claim Settlement Ratio numbers with a pinch of salt!

You can read the previous claim settlement ratio for life Insurance companies for 2008-09.

Govt allows LIC to hold upto 30% in companies.

India is to allow state-run Life Insurance Corporation of India (LIC) to triple the maximum stake it can hold in other companies to 30% in a move seen as helping a government sell-off of its own holdings in a range of firms.

The government plans to raise Rs.30,000 crore via share sales in state-run companies by the end of March next year, a crucial part of efforts to contain a widening fiscal deficit.

The government said on Wednesday it would kick off sales by offloading a stake in Hindustan Copper Ltd on Friday and in two more state companies by next month.

A market rally earlier this year has stalled and analysts said the government may be looking to LIC to support asset prices as it targets a budget deficit of 5.3% of gross domestic product (GDP) this fiscal year.

LIC has previously bailed out the government in share sales that failed to generate sufficient demand, including buying most of the shares in a $2.6 billion (around Rs.14,350 crore today) stock auction by Oil and Natural Gas Corp. Ltd in March.

“The government needs money, markets are not supportive, time is running out, valuations are not attractive for the government,” said Mehraboon Irani, head of the private client group at brokerage firmNirmal Bang Securities Pvt. Ltd.

Irani said LIC could potentially buy shares in companies at higher prices than would be acceptable to markets.

Standard and Poor’s and Fitch Ratings cut India’s sovereign ratings outlook to “negative” this year, putting the country at risk of losing its investment grade category.

Pressure on the government has grown after an auction of second-generation mobile phone licences this month attracted just a quarter of the original target.

Last month, it dropped plans to list steel maker Rashtriya Ispat Nigam Ltd after disagreements over pricing with investment bankers.

Increasing the amount that LIC can hold in companies was expected since the insurer already owns stakes above 10% in some firms, including state-run State Bank of India.

Mohammad Haleem Khan, secretary in the department of disinvestment, said the government would sell a 4% stake in Hindustan Copper, valued at nearly Rs.900 crore at current market prices, through an auction.

It also plans to sell stakes in miner NMDC Ltd and explorer Oil India Ltd before 20 December, Khan told reporters.

The benchmark BSE index, the Sensex, has fallen 1.6% since the start of October, hit by weaker global markets and worries about the country’s ability to pass fiscal and economic reforms, but is still up 19.5% this year.

“It is definitely positive for the market and the government,” said G. Chokkalingam, chief investment officer at Centrum Wealth Management Ltd.

“Pressure on the market will come down,” he also said, referring to worries of big share sales hitting the market.

LIC’s investment income, which comes mainly from equities, has grown from around Rs.32,200 crore in the year ended March 2006 to Rs.77,700 crore five years later.

Life insurers premium collection up 2.3% in October.

The premium collections of life insurers stood flat with a 2.3% rise in October 2012 at Rs 6,851 crore, compared to the same month last year, according to data from Insurance Regulatory and Development Authority (Irda). While the new business premiums of private life insurers was marginally down with a on% drop in October 2012 compared to October 2011, Life Insurance Corporation of India (LIC) saw a four% rise in new business premiums. 

For the period from April to November 2012, the premium figures saw a drop of 3.4% and stood at Rs 53,814 crore, compared to Rs 55, 738 crore in the same period last year. Among the public and private insurers, private insurers had a 5% drop in premiums for the April to October period, compared to corresponding period last year, while LIC saw a 3% drop in premiums for this period on a year-on-year basis.

Private sector insurers also saw a 15% drop in policies in this period (April to October) compared to last year, while LIC saw a two% rise in policies in the same period compared to 2011. For the month of October 2012, on a y-o-y basis, private life insurers witnessed a 8% drop in policies, while LIC saw a 11% rise in number of policies.

Among the private insurers, Edelweiss Tokio Life Insurance saw the highest growth in new business figures with the new premium figure standing at Rs 14 crore in April to October period, compared to Rs 1 crore in same period last year.

Due to the stagnant performance, the market share of the private life insurance companies in the industry fell to 25.5% in April to October 2012 period, compared to 26% in last year. In October too, the market share of private insurers stood at 31% compared to 32.2% in October 2011. This has led to a situation where the rest of the market share of the life insurance industry is held by LIC.

Top Pvt Life Insurers shut 1,500 branches in 2 years.

ICICI Prudential, the second largest private life insurer in the country, has reduced its branches by nearly a half from 1,923 to 1,000 in the last two years. The top six private insurers, barring SBI Life, reduced nearly 30 per cent of branches, while the headcount was scaled down 27 per cent in the same period. Interestingly, the profits of all these players doubled over the last two years.

Insurance companies have different takes on the matter, terming it “right sizing” or “smart usage of realty” or “efficient utilization of space” but the move to rationalize branch networks was a direct fall-out of the stringent regulations introduced by the Insurance Regulatory and Development Authority (Irda) in September 2010. TheIrda had raised the lock-in period and the insurance cover on the popular unit-linked products.

Top private life insurance players like Max New York Life, HDFC Life, Birla Sun Life, Aviva Life, Tata AIG Life and Bharti AXA Life all reduced their branch network between

18-250 in the last couple of years. However, in the same period, SBI Life, the second largest private life insurance player increased its branch network to around 714, from 494 as on March 31, 2010.

CUT TO SIZE
Company	Branches				Headcount			Net Profit/Loss (Rs Crore)
	2009-10	2011-12	Change	Change (%)	2009-10	2011-12	Change (%)	2009-10	2010-11	2011-12
ICICI Prudential Life	1,923	1,000	-923	-48.0	20,000	13,200	-34.0	260	810	1,384
Bajaj Allianz	1,151	1,044	-107	-9.3	20,000	13,829	-30.9	540	1,057	1,311
Max New York Life*	705	464	-241	-34.2	10,454	7,583	-27.5	-20	190	572
Tata AIG Life*	433	294	-139	-32.1	8,100	4,744	-41.4	-400	52	107
HDFC Life	568	474	-94	-16.5	14,397	14,310	-0.6	-280	-100	271
Birla Sun Life	652	634	-18	-2.8	—	12,279	—	-435	305	461

In terms of the number of employees, these top six insurers have reduced it by 26 per cent on average. ICICI Prudential Life reduced its headcount 34 per cent to around 13,200 in March 31, 2012 from 20,000 in March 31, 2010. Bajaj Allianz trimmed its employee count by more than 30 per cent.

“Our headcount has remained more or less constant and we have consolidated our branch network, which has resulted in the company firmly staying on the path of profitable growth,” said an ICICI Prudential Life spokesperson.

Over the last two years, all these insurers have improved their bottom lines significantly and reported net profits, though new business income across the industry nosedived.

Collectively, these six insurers reported a net profit of Rs 4,106 crore during 2011-12, compared to a loss of Rs 335 crore during 2009-10.

According to the Irda report for 2010-11, the life insurance industry had reported a net profit of Rs 2,657 crore as against a net loss of Rs 989 crore in 2009-10. Besides LIC, eleven private companies reported profits in 2010-11.

For instance, while ICICI Prudential Life reported a net profit of Rs 1,384 crore for the year 2010-11 as against Rs 808 crore in the corresponding period of the previous year, another significant player, Max New York Life, which reported a Rs 190-crore net profit during 2010-11, has already made a net profit of Rs 572 crore in the first nine months of 2011-12. Similarly, HDFC Life, which reported a loss of Rs 100 crore last year, reported a net profit of Rs 271 crore in 2011-12.

According to analysts, the move can also be related to the promoters. Having invested capital for nearly a decade, promoters are now demanding positive returns.

"In an effort to enhance productivity while rationalising on costs, the number of branch offices was right sized. However, this right sizing was done in a manner to ensure that no geography was exited and more importantly ensuring that customers had uninterrupted service and access to financial solutions provided by the company," said an insurance official on the condition of anonymity.

During 2011-12, the life insurance industry's policy issuance was down eight per cent, whereas for the whole private players industry it was down 24 per cent.

As a result, the first-year premium collection of life insures, was down nine per cent to Rs 1,14,233 crore against Rs 1,25,826 crore in the corresponding period of the previous year.

In the same period, the total collection by the private life insurance industry was down 17 per cent.

The Confederation of Indian Insurance Industry.

The Confederation of Indian Industry states that the insurance sector of the country has been witnessing a consistent growth rate of late and its present worth is 41 billion US dollars. 

The industry has of late achieved a yearly growth rate within 32 and 34 percent and this makes it the 5^th best among emerging economies around the world. The various entities of the industry are also bringing out newer products on a regular basis to attract their customers. 

As per rules, the upper limit of foreign direct investment permitted in this sector is 26 percent. However, this has to be done through the automatic route and the investor needs a license from Insurance Regulatory and Development Authority (IRDA). 

At present there are 22 life insurers in India. The IRDA has recently taken away the tariffs of the interest rates and this has provided insurers greater independence when it comes to deciding the price of their insurance policies. The insurance industry has also become more competitive as a result. 

Yet another important factor affecting this sector has been the recent financial meltdown. 

India insurance industry growth in last few years

The life insurance companies have performed the best when it comes to growth with an increase of almost 70% in new premium that has been collected in the initial 5 months of 2012. 

As per IRDA data, in April-August 2010 the insurance companies earned $11.73 billion in new premium - in the corresponding period in the previous year the amount stood at 6.9 billion dollars. 

LIC, a state held insurer, had been the biggest profit maker at that time with an addition of 88% to their existing business. The privately owned insurers together had seen a leap of 34% to their policy sales. 

ICICI Prudential earned 576.60 million dollars at that time. During April-August 2009 SBI Life had earned $379.20 million in sales of new policies and that figure went up to $531.87 million in the corresponding period in 2010 making it an increase of 40%. HDFC Standard Life also experienced a good growth of 54% in new sales. 

IRDA data shows that between April and October 2010 the general insurance industry experienced a year-on-year growth of 22.76% with regards to underwritten gross premium. 

The total value of that premium was 5.29 billion dollars while the same figure stood at $4.31 billion in April-October 2009. For the public sector companies the year-on-year growth rate was 21.09 percent between April-October 2010 and April-October 2009. 

In the same period the privately held insurers saw an increase of 25.19 percent in terms of premium collected. Among the publicly owned entities, New India Insurance was one of the better performers with a premium income of 916.77 million dollars in April-October 2010. 

At the same period in 2009 they had earned 770.25 million dollars which implies a growth rate of 19.04%. The IRDA Summary Report of Motor Data of Public and Private Sector Insurers 2009-10 states that in the same period almost 28.4 million policies were sold and the aggregate worth of premium collected was $2.31 billion. 

The health insurance sector, according to the RNCOS' research report named "Booming Health Insurance in India" posted unprecedented growth rates in 2008-09 and 2009-10. The report also estimates that between the 2009-10 and 2013-14 the sector would see a compound annual growth rate (CAGR) of at least 25%. 

India insurance industry - market share of leading companies

The following table shows the market share of top insurers in India in the period till April 2011:

Company	Approximate market share
LIC	50%
ICICI	10%
SBI	5%
Bajaj	4%
Reliance	5%
HDFC	6%
Birla	4%
Max New York	3%
Tata	2%
Met Life	1%
Kotak	2%
Others	8%

In terms of policies sold following are the top insurers in India:

Company	Policies sold till December 2011 (approximate figure)
LIC	20404281
Future Generali Life	100143
ICICI Prudential	785938
Met Life	98904
Reliance Life	698109
Star Union Dai-ichi	82037
Bajaj Allianz	640483
Shriram Life	73490
Birla Sunlife	589855
Bharti AXA Life	69151
SBI Life	491927
Aegon Religare	47332
Max New York	405662
IDBI Federal	45833
HDFC Standard	397408
Canara HSBC OBC Life	44899
Tata AIG	199275
DLF Pramerica	43299
Kotak Life Insurance	199614
IndiaFirst	38498
Aviva	100216
Sahara Life	36228
Edelweiss Tokio	1968

India insurance industry - some key findings

Following are some important findings from World Bank regarding the condition of insurance industry in India:

• Between 2005 and 2010 the yearly GDP growth was approximately 8.56%
• At the same time, the ratio of gross savings to GDP was 33%
• Middle class saw the quickest growth
• The life expectancy rate of people went up and urban development happened at almost 54%.
• In 2010 rate of premium growth came down to 4.2% and compared to global standards the premium share was pretty low
• Major operational issues for insurers were expenditure control, claims settlement procedures, improving investment yields, and capital requirements
• In the 2010-11 fiscal the life insurance industry grew by 4.20% while the general insurance industry increased by 8.10%.
• During that time the paid-up capital (private total) for the life insurance sector was INR 236.57 billion while the paid-up capital (industry total) was INR 236.63 billion.
• In 2010-11 the paid-up capital (private total) for the general insurance sector was INR 39.56 billion while the paid-up capital (industry total) was INR 67.06 billion.
• In 2010-11 the operating costs of privately owned life insurers was INR 159.62 billion while the total life insurance industry expense was INR 329.42 billion.
• In the same time the privately owned general insurers spent INR 39.32 billion from an industry total of INR 106.20 billion.
• In 2010-11 the privately held life insurers paid benefits and claims worth INR 312.51 billion while the industry aggregate was INR 1425.24 billion.
• At the same time the private general insurers paid benefits and claims worth INR 99.37 billion while the industry total was INR 295.36 billion.

India insurance industry composition

As per IRDA, the composition of the Indian insurance industry by March 2011 could be mentioned as such:

General insurance

Category	Number of organizations
publicly owned general insurers	4
private insurers completely owned by an Indian business organization	1
specialized general insurers	2
private insurers' JV with international insurers	14
Specialized health insurers	3

Life insurance

Category	Number of organizations
publicly owned life insurers	1
private insurers' JV with international insurers	21
private insurers completely owned by an Indian business organization	2

India insurance product composition

Following is an approximate representation of the product composition of India's insurance industry: 

General insurance

Product	Percentage
Engineering	4
Motor OD	27.63
Motor TP	14.94
Health	22.58
Aviation	1.08
Liability	2.40
Personal accident	2.63
Fire	10.91
Marine	5.97
Others	7.37

Life insurance

Product	Percentage
Non linked life individual	21.70
Non linked gen annuity group	4.33
Non linked gen annuity individual	0.85
Non linked pension group	4.22
Non linked pension individual	0.25
Non linked health	0.09
Linked insurance	55.01
Riders	0.01
Linked life group	13.54

India insurance industry major problems

Following are some of the major problems plaguing the insurance industry in India:

• Focus on actuarial pricing
• Regulatory misunderstanding
• Investment regulations
• Solvency regulation
• Claims settlement procedures
• Data clarity
• Distribution channel issues

India insurance industry contribution to GDP

Experts are of the opinion that around the world the insurance industry contributes around 4.5% to national GDPs. They have questioned the logicality of opinions that in India the contribution can be higher saying that there are other important sectors like education, defense, and health that cannot be undermined in this context. 

They have ruled out possibilities that the sector can contribute 10% to India's GDP. The Chairman of IRDA, Hari Narayan has ruled out any such possibility asking if India's GDP growth will be that much in the next few years ahead. 

The IRDA states that in India land and gold are more preferred as forms of investment. Narayan feels that if the insurance sector is to do well in terms of contribution to GDP then more people should be convinced about its capability to provide good ROI (return on investment). 

Why are more people taking insurance policies?

One of the major reasons for an increasing number of people availing insurance policies in India is the growing level of awareness. People nowadays value their lives, their health, and their families even more than before given the tough economic circumstances and so want to make sure that everything is fine even if they are not there. 

Yet another reason for the growing popularity of insurance policies is the benefit of tax exemption that is provided to family oriented and individual plans. Majority of the private insurers also provide lucrative returns and are now being availed by a section of the Indian society with greater disposable earnings. 

There is an aspect of psychological comfort attached to the insurance policies as well - whenever an insurance is availed the policyholder can be more or less assured of a safe future for that particular part of his or her life. 

Top Insurance Policies

Following are the featured insurance policies of various insurers in India:

Company	Product
LIC	Jeevan Vaibhav
ICICI Prudential	ICICI Pru iCare
Reliance General Insurance	Reliance Private Car Insurance Reliance Travel Care for Students
Bajaj Allianz	CashRich Family Floater Health Guard Plan Car Insurance
HDFC Life	Click2Protect HDFC LIFE SMART WOMAN PLAN
Tata AIG Insurance	Tata AIG Motor Insurance Tata AIG Travel Insurance Tata AIG Wellsurance Family
Kotak Life Insurance	Kotak Assured Protection Plan Kotak Assured Income Plan Kotak Assured Investment Plan
Aviva	Aviva Health Secure Aviva i-Life
Future Generali	Future Generali Smart Life Future Generali Health Suraksha
MetLife	Retirement Plans Met Monthly Income Plan
Star Union Dai-ichi Life Insurance	Suraksha Kavach
Shriram Life Insurance	ShriLife Wealth Plus Money Back Shriram Ujjwal Life SP
Bharti AXA	Bharti AXA Life eProtect
Aegon Religare	iTerm
IDBI Federal	Termsurance Wealthsurance Childsurance Lifesurance Healthsurance Incomesurance Loansurance Homesurance Bondsurance Microsurance
Canara HSBC OBC Life Insurance	Dream Smart Plan Grow Smart Plan Future Smart Plan Secure Smart Plan Smart Sanchay Plan
DLF Pramerica Life Insurance	Income Rakshak DLF Pramerica Family Income DLF Pramerica Family First DLF Pramerica U-Protect
IndiaFirst Life Insurance	IndiaFirst Maha Jeevan Plan
Sahara Life Insurance	Sahara Vatsalya-Jeevan Bima
Apollo Munich Health Insurance	OptimaRESTORE
Star Health Insurance	Family Health Optima Star Unique Health Senior Citizen Health Insurance
IFFCO TOKIO General Insurance	Auto Protector Policy Individual Medishield Policy
New India Assurance	Householder's Policy Motor Insurance Policy Overseas Mediclaim Policy Fire & Machinery Policy Industrial All Risk Policy Shopkeeper's Policy
Oriental Insurance	Oriental's Motor Insurance Policy Happy Family Floater Scheme
National Insurance	Car Insurance
Cholamandalam MS General Insurance	Chola MS Private Car Chola MS Student Travel Chola MS Family Healthline
HDFC Ergo	Travel Insurance HDFC Ergo Health Suraksha
Universal Sompo General Insurance	Householder's Insurance Policy Shopkeeper's Insurance Policy Motor Insurance Policy Individual Health Bills
L&T Insurance	my:health Medisure Prime Insurance