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Charts & Analysis

Private Insurers and Their Claims Rejection Ratios: Who Can You Trust?


In our first and second edition of Capital Mind Data Monster’s Life insurance Sector chronicle, we have talked about the premium collection of Insurance companies and their profit growth. In the third edition we will showcase Claims Rejection and Claims Pending ratios of the individual Life insurance companies.
You can catch the first and second installment of this in the here:
You Won’t Believe How Much Insurers Have Lost Since The Misselling Epidemic in 2011: The Insurer Chronicle
How Much Are Insurers Growing Their Profits? Data Monster Finds Out
What’s the point of insurance if you don’t pay out claims?.The better the settlement ratio and lesser the rejection ratio, more efficient the insurer is. Higher claim churn ratios indicate greater customer confidence on the insurance industry and lesser litigation.
And then, even companies with high settlement ratio or low rejection ratio are not efficient performers if their pending claims are high.
With IRDA norms stating that interest payment of 2% above the prevalent bank rate for a delayed payment of the claim amount, the insurers have become more cautious and are avoiding pending claims.
Interest payment on pending claims IRDA

(Click the image to read the complete document)

IRDA has taken some stern steps for processing of long pending claims by mandating to settle all the insurance claims older than three years. That way no claims older than three years can be rejected. Claims can be rejected/repudiated when the terms and conditions of the insurance policy are not met or falsification of data or non disclosure of data etc.
We now look at life insurers and their Death claim settlement ratios. Insurers have a very high claim settlement ratio for survival benefits or for maturity, where their money isn’t quite at risk (it’s usually the customers’ money). Even surrenders are processed quickly. But death claims tend to be a mess – and you want to know how bad: the higher their death claim rejection ratio, the more likely the company will lose business in the future.
The average rejection ratios of the industry (9 companies taken under review) is 4.14% for last five years. Similarly the average pending claims ratio stands at 12.49% and average settlement ratio at 85.10%. The average taken is for 20 quarters starting from Jun-2011 to March 2016.
Insurers claim rejection percentages

  • The claim data is only for claims relating to death.
  • The data under consideration is of last five years spread across 20 quarters starting from Jun-11 to Mar -16.
  • As PNB has not disclosed the data for Mar-16, hence the data taken is for 19 months.
  • The data is inclusive of Individual and Group Claims.

Kotak Life insurance lately has been both rejecting claims and keeping many claims pending. both of which are showing an upward trend. Claims pending for more than one year have been as high as 5% of all claims, and their total pending claims were nearly 35% recently, falling to a still-high 8%. Therefore, Kotak’s settlement ratio has gone down and is consistently below the 85% mark for last four quarters. Claims settlement ratio stands at 83% for the March 2016 Quarter.
Kotak rejected 8.7% of all death claims outstanding in the recent quarter, which means one out of 12 claims sees a “no”. This is a big warning sign.
SBI and HDFC are the best performers in terms of average rejection ratio over the last four quarters. HDFC, which had maintained almost nil rejection ratio in 2014, has shown an upward trend lately.
SBI has consistently maintained a low rejection ratio over a period of five years. Both SBI and HDFC have managed to clear their backlog of pending claims and keep the pending claims ratios small.
Claims Settlement ratio of SBI and HDFC for quarter ending March 2016 stands at 93.81% and 98.35%.
Life Insurance Claim Ratio Mar-16 Quarter
ICICI Prudential IPO will come around in next few months, so we need to look out at its claims churn ratios along with its profitability and growth. ICICI has improved its settlement ratio and decreased its pending claims but on the other hand has moderately increased its rejection ratio. For the last quarter ending March 2016 at  rejection ratio is at 4.01%.
Max’s settlement ratio and pending claims ratio stands at 95.88% and 0.12%, which are better than industry averages.
Birla’s insurance arm shows a very high pending and rejection ratio – both are above 8%. This is after a period of low rejection a few years ago. Birla’s high rejection rate will put off customers as word gets around.
PNB is notorious for a very high rejection rate, and hasn’t even released numbers for March! They have been rejecting more than 10% of claims in the last two quarters. Update: We now have the March data and the rejection rate for PNB is at 6% which is still relatively high.
LIC , so far has been the biggest Life insurance company in India and 5th largest in Asia. According to information from IRDA, for FY15 LIC of India was the best performer in terms of claims settlement (in terms of individual as well as group). Even with its mammoth size, the company didn’t slow down and settled 95.51%(Rs 9055 Cr) of Individual Life insurance claims and 99.62%(Rs 2037 Crs) of Group Life insurance claims.
Life Insurance Claims FY15
Source: Public Disclosure section of the individual company website and IRDA.

Our View

The insurers that have agreeable claims rejection rations (under 2% which is where LIC is) are Bajaj, HDFC and SBI. ICICI has had rejection rates of more than 3% recently, but it’s gettng better.
The worst insurers to deal with in terms of claims settlement are PNB, Kotak and Birla. (So watch out if you have term insurance from them!)
All insurers have had very high pending claims ratios – upwards of 10% in the last few years. It has only come down in March 2016. Interestingly the spread of 2% from the bank rate means an 8% penalty they have to pay for keeping claims pending – and 8% is a pretty good rate to pay for, in effect, borrowing money. IRDA might take notice and increase the penal rate – in our opinion this should be 1.25% a month (what the Income Tax department charges for delayed payments).
As insurers go public they will need to improve the public viewpoint on their settlement and rejection ratios. LIC remains the largest player and at that scale, it consistently rejects only 2% of all claims, which is a feat that has to be matched by private insurers.
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Nothing in this newsletter is financial advice and should not be construed as such. Please do not take trading decisions based solely on the matter above; if you do, it is entirely at your own risk without any liability to Capital Mind. This is educational or informational matter only, and is provided as an opinion.
Disclosure: The authors at Capital Mind have positions in the market and some of them may support or contradict the material given above, or may involve a direction derived from independent analysis.

  • Vijay says:

    Good Information..Eye opener for everyone.Keep up the good work.Thank you.

  • Priya Jain says:

    Dear Mr. Shenoy,
    I am writing to you on behalf of PNB MetLife Insurance. Your article mentions PNB MetLife as having a high rejection rate. However we would like to highlight that the information mentioned in the article is incorrect. Just to give you a background on the same:
    There is a three pointer claims philosophy adopted at PNB MetLife
    1. Assessing claims in a fair and objective manner by our team of technically competent claim assessors.
    2. Extending support to the claimant at every stage of the claims processing.
    3. Keeping customer centricity at the core while assessing all legitimate claims.
    The testimony to above philosophy is the reason for the upward trend noticed in the claim settlement ratio over the last four financial years.
    Financial Year Key Ratios Percentage Industry Ranking (Exc LIC)
    2011-12 Settlement 81% 19th
    Rejection 10% 13th
    Pending 9% 19th
    2012-13 Settlement 84% 15th
    Rejection 13% 16th
    Pending 3% 11th
    2013-14 Settlement 90% 9th
    Rejection 9% 11th
    Pending 1% 4th
    2014-15 Settlement 93% 6th
    Rejection 6% 6th
    Pending 1% 8th
    For FY 2015-16 there is a slight dip which is primarily associated due to sudden spurt in increase of fraudulent claims. The experience of fraud claims was not an isolated incident which was unique to PNB MetLife as most of the private insurance players witnessed decline in their settlement ratios.
    Also an article featured in Business Standard on “Look Beyond Premium To Buy A Policy”, PNB MetLife has been ranked as top player in private life insurance sphere in settlement of claims within 30 days
    Your article also states that PNB MetLife has not released its claims figures for March. This information is also incorrect. The claim statistics figures – Quarterly & Yearly are readily available on our website ( The information can be accessed through the mentioned link –
    Given this, request you to kindly rectify the article on the blog at the earliest as the information mentioned currently is misleading. Look forward to hearing from you on this.
    Priya Jain
    Chief Manager – Corporate Communications I India I PNB MetLife

    • Thanks for your post. I would like to provide our clarifications. Firstly the Q4 disclosure report wasn’t available in the quarterlies, and we now have the annual report which at the time was not available I believe. We might release a new report once we have all the June quarter numbers of all insurers.
      Secondly, on the claims numbers, please note that no one cares about settlement of claims on maturity or surrender – there is nearly no reason for a claim to be denied in such cases, and nearly all insurers settle most claims. We believe the “trust” factor is only about death claims and your mail talks about total claims, which is not the subject of the article at all (it’s clearly mentioned that all claim data is about claims for death only)
      We have tabulated, in that post, all data about death claims only. As you can see there, the graph is valid for data that we have compiled (until Dec 2015 for PNB Metlife). If I see the now-available Q4 report, it shows, for death claims: 99 claims rejected+repudiated, for a total of 1649 claims which is about a 6% rejection rate. Among the insurers we checked only Birla and Kotak were higher. So we have updated the text to reflect this, and mentioned that relatively this rejection rate is still high.
      Also if you look at your death claim data as of Sep 2014, the claims outstanding at end of period was mentioned as 67. The claims outstanding at the beginning of the disclosure for quarter ended December 2014 is 9, which doesn’t make sense (both these numbers should be the same). We had found a few such instance in the PNB Metlife disclosures. Just bringing this to your notice.
      Hope this helps. As mentioned, the claims settlement is about death claims only so the data tables we have mentioned are more relevant.

  • Pooja Khan says:

    Dear Deepak,
    Thank you for your patience with us. Just wanted to clarify that the data given is related to death claims in Priya’s email below. Please do rectify if you can. Incase you still require clarifications, we will be happy to get into a call with you.
    In future, do feel free to write in to us for any clarifications or data you may need on PNB MetLife. We will ensure that you get correct information and in the right context.
    Pooja Garg Khan
    Head-Corporate Affairs & Communications I India I PNB MetLife
    Platinum Towers, 4th Floor, Sohna Road, Sector 47, Gurgaon – 122002 I India

    • Have replied to you by email too, Pooja. Thanks for that. I’ve already rectified the post to reflect the Q4 numbers, and as stated it’s still the third highest in the list we have (as in, only Kotak and Birla are worse). There is no misleading information in the post as I have clarified – we have shown the data on a quarterly basis, which reflects the data from the PNB website. Additionally, we have pointed out some flaws in your data which might be useful for the PNB team to correct or clarify, specifically this paragraph:
      “Also if you look at your death claim data as of Sep 2014, the claims outstanding at end of period was mentioned as 67. The claims outstanding at the beginning of the disclosure for quarter ended December 2014 is 9, which doesn’t make sense (both these numbers should be the same). We had found a few such instance in the PNB Metlife disclosures. Just bringing this to your notice. ”
      If you have any further questions, please do let me know.

  • Milan Thakkar says:

    Dear Deepak,
    Can you also add the Insurance provider Aegon ( to the study please?