In order to avoid having to make large out-of-pocket expenses in the event of an emergency, people purchase general insurance. They pay premiums out of trust rather than just investing their money. But not every claim is accepted. According to a recent research, the claim-to-settlement ratio, which indicates the proportion of claims that insurers honoured, decreased from 87% in FY22 to 86% in 2022–2023.
According to a comprehensive analysis by the Insurance Brokers Association of India (IBAI) based on data provided by insurance firms, the claims repudiation percentage for general insurance—which covers health, fire, vehicle, and marine cargo coverage—rose to 6%. This represents the percentage of all claims submitted by policyholders that an insurance company rejects.
At 0.2%, New India Assurance, a public sector insurance, has the lowest claims repudiation ratio. Shriram, Future Generali, Aditya Birla Health, and HDFC Ergo are some large private insurers with lower claim denial rates.
Insurance companies are required by the insurance watchdog IRDAI to post information about settlements and rejections on their websites. The IBAI has compiled information from insurers into a report that may help consumers make well-informed decisions regarding a company’s performance history when purchasing insurance plans.
Public sector general insurers, large private sector general insurers, other private sector insurers, and standalone health insurers are the four groups into which the IBAI has divided general insurers in the Policyholder’s Handbook. In the health insurance category too, New India Assurance came on top among the public insurers with a claim-settlement ratio of 95%.
Among independent health insurers, Aditya Birla Health had the best claim settlement rate, at 95%. According to the IBAI handbook, Iffco Tokio and Bajaj Allianz were two of the leading big private sector general insurers with the best claims-to-settlement ratios of 90% or more.
It is important to keep in mind that health insurance is a combination of data for both individual and group (business) coverage. In the case of business policies, claim rejection rates have generally been lower. “Irdai does not give data for individual and group claims separately. Why not? Who is it protecting,” asked author-influencer Monika Halan.
When distinct claim-settlement data for each health insurance policy is accessible, the true picture will become apparent. Experts assert that deliberate or unconscious deficient or fraudulent disclosure made at the time of policy purchase also plays a role in claims denial. In settling motor vehicle own-damage claims too, New India Assurance was the best public insurer with a claim-settlement ratio of 92%.
Among large private sector insurers when it came to own-damage claim settlement, Royal Sundaram, Go Digit and SBI General came on top. Future Generali was the top among small insurers. The insurance coverage, be it life or general, is low in India but the tax on insurance premiums, at 18%, is high.
Compared to wealthy nations like the US, where insurance penetration is above 90%, India has a low penetration rate of 30%. The high 18% GST on insurance premiums defies sense, notwithstanding the lack of a social security net and the shoddy state of the government’s healthcare system.
Experts told India Today Digital that because premiums are so exorbitant, many consumers choose to have a reduced coverage. For the insurance business to flourish and for customers to receive better coverage for themselves, a number of reform initiatives are required. For people to make an informed decision, separate data on claim-settlement ratios for individual and group plans is required, not only for tax reduction.