BENGALURU: The life insurance industry is honouring more claims, helped by technology and better fraud management. The claims payout ratio has improved significantly, with private industry paying 95.2% of all claims in 2017-18, compared to 93.7% in the previous year, and 88.3% in 2014-15. LIC has long been paying over 98% of its claims. That continues, though it slipped marginally in 2017-18.
In fiscal 2018, 21 of 23 private life insurers paid more than 90% of claims, unlike in 2014-15, when only nine did so and the majority paid out only 50-70% of claims. Claims repudiation (those rejected) by private players is also down to just under 4%, from 4.6%.
Fraud management, tech, regulation help cut rejections
Among the reasons for this improvement, insurers say, is that they have adopted better fraud management techniques at the underwriting stage itself so that they don’t have to weed out fakes at the point of claims. “We have robust underwriting practices using data analytics and technology-enabled verification processes. This way, we are able to detect frauds before policy issuance. For the over 10,000 claims we got last year, we paid 98.2%, amounting to Rs 353 crore. We rejected only 178 claims, of which only two were cases of fraud and the remaining were medical non-disclosures, such as terminal ailments,” said V Viswanand, deputy MD of Max Life Insurance, which in 2017-18 had a higher claims payout ratio than even LIC — the first time perhaps that a private insurer has beaten the government behemoth.
For years, the life insurance industry has been plagued by fraud syndicates, which operate in places like Vadodara in Gujarat and Bellary in Karnataka. “Such syndicates would mostly operate with the connivance of the police, hospitals and fraudsters. Death claims can be high, ranging from Rs 1 lakh to Rs 1 crore. Frauds were a big bleed for the life insurance industry. But with better technology and stringent fraud management, they have reduced over the years,” said an LIC official.
Insurers also say that technology has ensured faster settlement of claims. “Through our insta-claim initiative, our aim is to pay eligible death claims — meeting certain sum assured and policy tenure conditions — within 24 hours. Today, nearly 50% of our death claims are settled in such a manner,” said Viswanand.
HDFC Life Insurance has introduced same-day claims processing. “Most fraudulent claims arise within the first year of buying the policy. So, for all customers who’ve been with us for more than three years, we settle claims within 24 hours. We’ve honoured 97.8% of individual claims and 99.3% of group claims,” said a representative of the insurer.