Pvt insurers like Aviva and Birla Sun Life rejected more death claims than LIC in FY13

MUMBAI: Private life insurers such as Aviva, Birla Sun Life and Bajaj Allianz rejected a much higher share of individual death claims than the state-owned Life Insurance Corporation of India in the last fiscal year.

According to a report by sector regulator, the Insurance Regulatory and Development Authority, private sector insurers rejected — or, repudiated, as the industry calls it — 7.85% of claims while LIC rejected only 1.12% of claims.

Insurers blame early claims arising from frauds in certain areas for high rejection rates. “Rejection is high because of frauds from semi-urban and urban areas,” TR Ramachandran, MD and CEO of Aviva Life Insurance, said.

Aviva rejected claims worth Rs 35 crore last fiscal while Birla Sun Life rejected claims worthRs 64.72 crore and Bajaj AllianzRs 62.73 crore.

The data of insurance companies are not comparable because of their different size. “When comparing the claims ratio, it is imperative to take the absolute base of customers and to make a differentiation between early and normal claims,” Sandeep Ghosh, MD and CEO at Bharti AXA Life Insurance, said.

“It is certain that companies will do some investigation for early claims,” he added. Amitabh Chaudhry, MD and CEO at HDFC Life, said some insurers are hit by frauds. “Companies writing a lot of business where medical test is not required is not a good practise.

Especially when they get early claims, it is investigated and rejected if it found to have manipulated,” he said. Insurers reject claims on the grounds of suppression of facts such as medical history.

In 2012-13, life insurance companies settled 8.46 lakh claims on individual policies with a total payout of Rs 9,370 crore. The industry repudiated 18,485 claims for an amount of Rs 568.42 crore. The number of claims pending was 12,267 worth Rs 318.24 crore.

Settlement ratio of private sector insurers last fiscal dropped to 88.65% from 89.34% in the previous year. In the case of LIC, the largest player in the industry, it improved to 97.73% last fiscal from 97.42% in 2011-12. The percentage of repudiations dropped to 1.12% from 1.30%.