Pvt firms beat LIC in payouts
Private life insurers have improved their settlement record compared with LIC but lag the PSU behemoth in earning profit, a study by the insurance regulator said.
As many as four insurers — HDFC Life, ICICI Prudential, Max Life and Tata AIA — have a settlement ratio better than LIC in the last fiscal. A year ago, only Max Life was ahead of LIC.Claims settlement is a key measure of efficiency of an insurer.
A combination of factors such as a fraud detection system and use of technology and analytics have helped private insurers to improve their claims settlement.
“The fact that private insurers have achieved high claims ratio despite having a significant portion of pure protection business in their mix is an achievement,” said Vibha Padalkar managing director and CEO of HDFC Life.
“Pure protection policies are more prone to fraud and consequently tend to have lower settlement ratio. At HDFC Life, we deploy analytics to screen adverse risks and by refining underwriting process, we can identify fraudulent claims,” Padalkar said.
“We use predictive analytics and technology for assessing risk at the on-boarding stage. Our ability to detect fraudulent policies at the initial stage allows us to avoid claims,” said Yusuf Pachmariwala, executive vice-president and head of operations at Tata AIA Life Insurance.
While claims settlement has seen a year-on-year improvement, profitability is still an area where private insurers are lagging LIC.
LIC earned a profit after tax of Rs 2,688.50 crore in 2018-19, up 9.89 per cent over the previous year. In contrast, 23 private life insurers earned a profit of Rs 5,747.31 crore, down 5.22 per cent over the previous year. Factors such as a higher share of new business premium and rising operating expenses have influenced the bottomline of insurance companies.
“Life insurance companies continue to underwrite new business with the expectation of a larger renewal base at a later stage. But new business premium (NBP) is a business strain and NBP growth may not culminate in bottomline growth in the near term,” said Vignesh Shahane, MD and CEO of IDBI Federal Life Insurance.
“According to Indian GAAP, expenses have to be recognised upfront while premium is recognised over the lifetime of a policy. This results in new business strain. Accounting profits emerge in subsequent years,” said Padalkar.