A sudden
accident or unexpected event can cause injury, harm, or even death, resulting
in loss of income. In such scenarios, life insurance provides financial
support, compensating for the future income lost. Therefore, choosing a
reliable life insurer who fulfills their promise to pay the claim amount
promptly and fully is crucial.
Claims
Settlement Ratio is a key measure used to assess an insurer's reliability.
Simply put, it is the percentage of claims settled out of the total number of
claims received in a year.
A high Claims Settlement ratio
demonstrates a brand's commitment to honouring claims, which in turn builds
consumer confidence. A company's claim settlement ratio can give consumers an
idea of how willing it is to pay valid claims, but it should not be taken at
face value. The reason for this is that the Claim Settlement ratio may
temporarily be skewed due to the volume of claims, factors beyond the insurer's
control, and long claim pending periods. It is possible for an insurer to
record a higher claim settlement ratio during a particular quarter than it did
during the previous period.
One of the major factors that drive a
claim settlement ratio is disclosing all material facts about the Insured’s
health, past Insurance cover, and details on Occupation and income in the
proposal form while availing of the cover. Material disclosure leads to an
informed underwriting decision and a hassle-free and faster processing of claims.
Tata AIA's Executive Vice President
and Head of Operations, Sanjay Arora, offers an interesting perspective on
the claim settlement ratio. “Claim settlement ratio is also viewed basis of Claims
Value. It is imperative to note that the claim value may look distorted if any high-value
claim gets repudiated due to non-disclosure of material facts by the Insured.
Hence this, in isolation is not the right metric to be referred to.
Hence, the annual claim settlement
ratio is the key metric to be considered. Consumers should additionally focus
on how the company has performed over time, for example, the last five years on
the claim settlement ratio. This will reveal how consistently a high level of
claim settlement has been maintained,” Mr. Arora added.
Persistency
ratio is another key metric, that consumers should consider while choosing a
life insurer. This ratio measures the percentage of people who renew their life
insurance policy annually, reposing their trust in the brand.
One of the key Persistency
metrics is the 13th Month Persistency ratio or the percentage of consumers
renewing their policies one year after buying them. This is most important
since unsatisfied consumers are unlikely to renew their policies. Further, one
should evaluate the insurer on other periods including the 25th, 37th,
49th, and 61st month, thereby gauging the quality of
service and support over a longer period.
According to
Mr. Arora, “A life insurance policy offers
long-term assurance that the life cover will remain active for the duration of
the policy. High Persistency Ratios
indicate that an insurance company cares about its customers' financial future.
As a result, consumers should also look at how a company performs on the
persistency front, along with checking its claim settlement ratio record."
To ensure maximum consumer satisfaction, life insurers
strive to provide the best-in-class consumer experience. Since Net Promoter
Score (NPS) is the gold standard of customer experience metrics, the industry
has put considerable effort into improving the NPS. Tata AIA, for example, has implemented
an NPS study that maps 18 aspects of consumer experience to implement consumer
feedback rigorously. As a result of this initiative, the NPS of Tata AIA improved
to 80 in FY24
For FY24, Tata AIA also delivered a very impressive
Claim settlement performance. The Individual Death Claim Settlement ratio
for FY24 improved to 99.13% from 99.01% in the last fiscal year. During the
financial year, the Company settled claims valued at INR 1086.15 crores,
benefiting 5499 consumers. As of FY24, 424.62 crore of total
claims amounts were settled within 24 hours, ensuring consumers received
their claims amount the following day.
Tata AIA's Individual Death Claim
ratio has steadily increased over the past few years:
|
Business Metric |
FY 2020-21 |
FY2021-22 |
FY 2022-23 |
FY 2023-24 |
|
Individual Death Claim Ratio |
98.02% |
98.533% |
99.01% |
99.13% |
As for the other key business metric, Tata AIA
performed very well. For FY24, Tata AIA ranked #1 in 4 out of 5 cohorts
of Persistency, across different renewal cycles i.e. from the 13th month to the
61st month, on a premium basis.