According to the data collated from IRDAI and LIC, death claims paid by life insurance companies crossed Rs 19,000-cr mark in 2016-17
The massive uptake of life insurance cover in the recent years is showing up in claims.
According to the data collated from Insurance Regulatory and Development Authority and Life Insurance Council, death claims paid by life insurance companies crossed Rs 19,000-crore mark in 2016-17, almost four times Rs 5,288 crore paid out as death claims in 2007-08.
Experts say that a proliferation of life insurance business, higher sum assured opted for by policyholders and competition to Life Insurance Corporation by private sector insurance companies have contributed to the spurt in death claims paid by the industry on the whole.
A death claim is a formal request made by the nominee in a life insurance policy to the life insurance company. This request is made for the payment of the life cover amount in case of the unfortunate event of the death of the life assured.
Data shows that death claims paid for individual policies account for roughly two-thirds of the total annual amount. The balance one-third is accounted for by death claims paid for group policies.
V Manickam, secretary general, Life Insurance Council, says that over the last few years life insurance customers have taken higher sum assured.
"LIC has always been dominant. But the advent of private sector life insurance companies who were focusing on higher ticket-size in terms of premium showed LIC that it can do the same. Term insurance has emerged as a big product today. In earlier days, the focus was on selling traditional products like money back, etc. With higher premiums and deeper penetration, life insurance industry paid out bigger claims as well."
While annual total death claims paid languished between Rs 5,000 crore to Rs 8,000 crore between 2007 and 2010, claim amounts consequently became much larger. In each subsequent year, death claims paid rose by Rs 2,000 crore each.
Pawan Mahajan, head - underwriting & hubs, Bajaj Allianz Life Insurance, said the number of claims paid during 2007-08 would be on the policies covered from 2001 to 2007. In the FY 2007-08, life insurance industry added 5.08 crore new policies and a total premium of Rs 201,351 crore.
"For the past eight years, every year, new business is added to the base in addition to the renewal business. In FY2015-16, the industry added 2.67 crore new policies, a total premium income of Rs 366,943 crore. Obviously, the accumulated premiums received over the years would be multifold since 2007-08. The increase in claims paid is no surprise," Mahajan added.
The performance with reference to the settlement of claims received is considered as the litmus test of a life insurer's credibility. If an insurance company repudiates or delays payment of a claim, people are very unhappy and it negatively reflects on the admission of new policies, profitability and also on the reputation of the industry.
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Data shows that death claims paid for individual policies account for roughly two-thirds of the total annual amount. The balance one-third is accounted for by death claims paid for group policies.
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