Comparing Term Insurance Claim Rejections

by Manshu on March 23, 2011

in Insurance

A few days ago I posted the premiums charged by different term insurance companies, and as a follow up to that post I shared the claim settlement data of some insurers last week.

Today I’m going to share the claim settlement ratio of all 23 life insurance companies in India for the December 2010 quarter. Rejections are simply claims that the insurance company has refused to pay, and lower the rejection – better it is for you.

This is very interesting data, and the one thing that jumps out at you is the low rejections by LIC.

Here is the first chart which shows the percentage of claims rejected by all the insurance companies for the December 2010 quarter. (Exceptions in time period are noted in the last table which has the raw data.)

 

Rejected as a percentage of new and outstanding

Rejected as a percentage of new and outstanding

(click for larger image)

Now, when I looked at this two questions came to my mind:

1. How much difference does the relative volume make to these numbers?

2. Are these numbers skewed because of the 2 year rule?

Let’s think about the question of relative volume first. The new plus outstanding claims of Religare was 47 for that period, so even if they rejected 2 claims that would be a rejection rate of close to 5%; that they rejected 20 doesn’t exactly inspire confidence, but you can easily see why this number can’t be compared with LIC which has about 2.3 lac policies for that period.

The 2 year rule is that insurance companies can’t reject policies that are older than 2 years unless they can prove fraud. Loney – who is easily the most prolific commenter here has dug up the relevant act as well, and here is how it quotes:

Section 45 of Insurance Act, 1938 states: In accordance with Section 45 of Insurance Act, 1938, no policy of life insurance shall, after the expiry of two years from the date on which it was effected, be called in question by an insurer on the ground that a statement made in the proposal of insurance or any report of a medical officer, or a referee, or a friend of the insured, or in any other document leading to the
issue of the policy, was inaccurate or false, unless the insurer shows that such statements was on material factor or suppressed facts which it was material to disclose and that it was fraudulently made by the policyholder and that the policyholder knew at the time of making that the statement was false or that it suppressed facts which it was material to disclose.

So, are these rejections influenced by the fact that some insurers have been around for much longer,  and most of their claims are from policies that are older than 2 years.

So, let’s look at the data only for rejected claims that are less than 2 years old across life insurers.

Rejected Claims less than 2 years as a percentage of new and outstanding

Rejected Claims less than 2 years as a percentage of new and outstanding

The numbers don’t seem to change much, and finally let’s take a look at the ratio of claim rejections between claims that are more than 2 years old and less than 2 years old.

Proportion of Rejected Claims

Proportion of Rejected Claims

 

As expected, the claims that are less than 2 years old are rejected more often than claims that are older than 2 years, and obviously that will weigh on some of the newer insurers.

However, no matter what way I look at it LIC’s low claim rejections jump out at me. That they are expensive when compared with others makes the choice of a term plan difficult, but this is certainly something worth keeping in mind – especially for people who smoke socially or have minor health problems that can later become a cause for denial of your claim if not declared properly.

I’m enclosing the raw data in this table below, so you can use it if you want, and the sources are the same as mentioned in my earlier post, so I’m not pasting those ugly links again.

S.No. Insurer Claims O/S New Claims Claim settled Claims rej Less 2 y Greater 2 y % Rej % Rej less 2 % Rej greater 2 % Settled
1 Aegon Religare 22 27 13 20 20 0 40.82% 40.82% 0.00% 26.53%
2 Aviva India 0 532 469 63 42 21 11.84% 7.89% 3.95% 88.16%
3 Bajaj Allianz Life Ins 2,548 6,485 6,268 465 374 91 5.15% 4.14% 1.01% 69.39%
4 Bharti AXA Life Insurance 127 222 168 24 23 1 6.88% 6.59% 0.29% 48.14%
5 Birla Sunlife 173 3,113 3,029 146 142 4 4.44% 4.32% 0.12% 92.18%
6 Canara HSBC OBC Life Ins 74 72 50 11 11 0 7.53% 7.53% 0.00% 34.25%
7 DLF Pramerica 14 17 6 6 6 0 19.35% 19.35% 0.00% 19.35%
8 Future Generali 2 230 162 51 51 0 21.98% 21.98% 0.00% 69.83%
9 HDFC Life 208 1,196 1,139 40 35 5 2.85% 2.49% 0.36% 81.13%
10 ICICI Prudential (Full year) 901 15,605 14,862 554 498 56 3.36% 3.02% 0.34% 90.04%
11 IDBI Fortis 70 105 75 19 19 0 10.86% 10.86% 0.00% 42.86%
12 India Life (for 31st March 2011) 0 13 7 1 1 0 7.69% 7.69% 0.00% 53.85%
13 ING Life 112 1,550 1,462 58 54 4 3.49% 3.25% 0.24% 87.97%
14 Kotak Life 411 631 627 33 27 6 3.17% 2.59% 0.58% 60.17%
15 Max New York 707 1913 1669 248 221 27 9.47% 8.44% 1.03% 63.70%
16 Met Life 206 3562 3150 98 87 11 2.60% 2.31% 0.29% 83.60%
17 Reliance Life 957 4,025 3,272 256 251 5 5.14% 5.04% 0.10% 65.68%
18 Sahara Life (Sep 2010) 281 233 156 70 65 5 13.62% 12.65% 0.97% 30.35%
19 SBI Life 685 5,745 4,622 894 484 410 13.90% 7.53% 6.38% 71.88%
20 Shriram Life (June 2010) 475 212 197 138 127 11 20.09% 18.49% 1.60% 28.68%
21 Star Union Daichi 22 304 218 4 4 0 1.23% 1.23% 0.00% 66.87%
22 Tata AIG 26 883 702 152 136 16 16.72% 14.96% 1.76% 77.23%
23 LIC 53,765 181,165 182,211 506 443 63 0.22% 0.19% 0.03% 77.56%

 

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{ 111 comments… read them below or add one }

pattu March 23, 2011 at 6:31 pm

“However, no matter what way I look at it LIC’s low claim rejections jump out at me. That they are expensive when compared with others makes the choice of a term plan difficult, but this is certainly something worth keeping in mind – especially for people who smoke socially or have minor health problems that can later become a cause for denial of your claim if not declared properly.”

Awesome. People who say no force on earth can reject your claim if you are honest upfront are not necessarily right. I spent a lot of time debating what TI to take and finally settled on one LIC Amulay Jeevan

Since I am in my mid-30s slightly overweight and have BP splitting polices will turn out expensive for me
http://www.themoneyquest.com/2010/01/split-term-life-insurance-plan-policy.html

Given these numbers I asked why split? one lic policy seems better than 2 with one of them lic. My nominee stands a better change of being paid.

I think many bloggers go on and on about splitting policies with no clue of how the claim process and work the complications that arise.

You dont buy Ti for yourself. You buy it for others. Things like will your spouse give up if there is initial rejection do they have the education/support to go to ombudsmen etc must be taken into account.
One size doest fit all. TI advice depends on age and health besides net worth

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Manshu March 24, 2011 at 8:34 am

In my earlier post that was something I stated as well – that one of the factors in selecting LIC was that we knew the agent fairly well.

However, as you say yourself – one size doesn’t fit all, and someone who is 22 hasn’t smoked ever and has no other health problems may not benefit from paying more for a policy.

Also, I’m curious to know under what conditions taking 2 policies from different insurers become more expensive? Did you see any patterns in this?

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pattu March 24, 2011 at 8:45 am

It is unlikely a 22 year will have a TI unless he is pretty financially literate. Also if he is unmarried and not a parent and not seen sudden death of a young person he will have no idea of how important hassle free claim settlement is. I will recommend private TIs only to those who cannot afford LIC policies and who are pretty young. they could take a second LIC polcity later when their responsibilities increase.

Paying more for a policy is for peace of mind about settlement. Age has little to do with it. I agree affordability and age related maturity has a lot to do with it.

The money quest lisnk I sent has a detailed analysis. Age, smoking and health related loading will only make two policies more. Difficult to analyse this as loading structures may be different from company to company.

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Manshu March 24, 2011 at 8:54 am

I know a few people who took out policies at that age or may be they were 23 or 24 at that time. I mean there are a lot of finance MBAs and CAs that graduate every year who are responsible for their parents so – minority yes, but not very unlikely.

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pattu March 23, 2011 at 6:38 pm

Incidentally if you look at group insurance death claim ratios everyone has the same %s. I suppose when it comes to a corporate setup a insurer thinks it works out cheaper to pay out the claim for a few employees than risk losing the business of the entire office. After all the chances of several employees dieing at the same time is low in one year (usual term for GTIs). Once could always set a higher premium the next year!

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Manshu March 24, 2011 at 8:32 am

Hmm, so is the lesson – take life insurance if your company offers it? What happens when a person resigns?

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pattu March 24, 2011 at 10:17 am

Yes. Group TIs are renewable each year and the insurer may change. An independent policy for people in corporate setup is a obviously must.

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Manshu March 24, 2011 at 4:34 pm

Thanks for your response.

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Salil A March 23, 2011 at 10:05 pm

Hi,

I think you have done a great job with the data. I guess the normally advised 2 Term policy thumb rule (6-7 times of annual income, 50% in LIC Term Plan + 50% in some online Term plan) seems good from above data.

Maybe in another 3-4 years data will be more robust. As you rightly pointed out, on small volume, check rejection % doesnt prove conclusive. Over the next 4-5 years you can take a call on some of the players who are currently new. Anyways in 4-5 years time we would need to take more Term Insurance as annual income would go up so this data will be useful later on as well.

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Manshu March 24, 2011 at 8:35 am

So, which order will you go in then- buy online now and offline later, or offline now and online later?

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Vinod Sharma March 23, 2011 at 11:28 pm

Could you pls specify the data on claims pertains to what period ??

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Manshu March 24, 2011 at 8:36 am

Dec 2010 quarter, except for 3 which I couldn’t find. if you see the table in case of exceptions the time period is listed against them.

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chetan March 24, 2011 at 4:58 am

good work.
perhaps we need to wait for few years before we can decide the second online insurer for proper data as many of online insurers are new players in the field.

I request the author to work on health insurance which is equally important in financial planning as life insurance . Rising health care costs put lot of stress on one s financial health if a member of the family is admitted.

can you please tell me about a health insurance that pays for out patient charges , consultation and investigations as well. I tried searching but could not find one.

Thanks a lot .

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Manshu March 24, 2011 at 8:38 am

I’ll try to see if I can find data about health insurance. It has taken a big piece of research from a reader to get me started on life insurance, so frankly I don’t expect health to happen any time soon.

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chetan March 24, 2011 at 12:08 pm

hi, got this one today….opd coverage … but in comparision with other insurers the opd coverage plans are too costlier and not recommended.
http://www.healthinsuranceindia.org/health_insurance_opd_coverage_policy_1.asp

http://www.healthinsuranceindia.org/health_insurance_opd_coverage_policy_2.asp

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Manshu March 24, 2011 at 4:34 pm

Thanks for the link Chetan – I’ll go through them in detail during the weekend.

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Albert November 19, 2012 at 6:08 pm

Ask your neighbors who insuers them. This would be a good place to start, as they must have insurance. Also, if you just bought the property, ask the sellers who their insurance was through.Good luck!

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Manoj March 27, 2011 at 7:41 am

Hi everybody,
1. Don’t Try to Buy the cheapest, No Medical, easy to Buy policy.
2. After you paying Premium for decades, your family will be denied the the Benifit on flimsy grounds.
3. Even if you don’t smoke, Passive smoking can lead to detection of smoking in blood even after 2 years of such incident and can be a reaon for a Company to deny you the benifits.
4. Buying financial products is becoming very risky affair and these are long term commitments, that you buy probably once in life..and can’t afford to regret later.
5.I know of Private companies rejecting claims on absolutely flimsy grounds.

Take Care !!

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Manshu March 27, 2011 at 9:02 am

Hi Manoj – thanks for your thoughts – any examples of a flimsy reason? I’m really curious to know that, and I’m sure a lot of other folks are too.

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kunal March 28, 2011 at 2:30 am

Manshu, this is a very useful information.
Thanks.

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Manshu March 28, 2011 at 1:50 pm

Glad you found it useful.

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Santosh May 19, 2011 at 5:33 am

Very Useful info, your analysis and readers comments have helped me buy my second policy.

thanks
Santosh

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Manshu May 19, 2011 at 4:15 pm

Thanks for your comment Santosh – OM attracts some amazing readers, and the post is always enhanced by the discussion that we have here.

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Preethi June 15, 2011 at 3:52 pm

Hi, Thanks for the information. Good to know that LIC has good track record. I have LIC policy but apart from that I feel need to have health insurance policy for my family members. After doing some research online, i have decided to go with Max Bupa’s Family floater plan http://www.maxbupa.com/ForyouyourFamily/Heartbeat/familyfloater.aspx
Would be grateful if you provide some claim settlement information on medical insurance in India. This would help us while choosing health plans.

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Manshu June 15, 2011 at 8:01 pm

Hi Preethi – No one has asked this question before, and I don’t even know if this kind of information is available, but I’ll try searching for it. May I ask you what led you to select Max Bupa? Just curious about it.

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Gopi June 29, 2011 at 11:42 pm

Hey Man! First of all thanks a ton for the excellent info. More importantly, fantastic way of reporting the numbers that make it so easy to see the big picture. I am certainly benefited by your post as well as from some of the readers’ comments. I had never thought of 2 TI’s until now and it was an eye opener (though it looks like it’s debatable, but I hadn’t thought about it at all). Well done!

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Dan July 12, 2011 at 10:24 am

Manshu,
Thanks for the informative post.

I am 34 yrs old male, diabetic and have Cholestrol. what is your advise on Term Insurance.
Will LIC and other pvt companies increase their premium due to the above health conditions of mine…i am looking for a 30 yrs term and coverage of 1 Cr. please advise.
Thanks,
Dan

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Manshu July 12, 2011 at 7:07 pm

Dan, I’m afraid I’m not knowledgeable enough to answer your question, and give you any recommendation. I hardly ever engage in giving out personal advice in this blog because I’m not a professional, and may not be able to give you the best solution for your situation.

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Dan July 13, 2011 at 9:27 am

Dear Manshu,
Thisis the first time I am into reading any blog and I was really impressed by the way how this blog is managed and also all the comments. Please consider my ignorance as a reason for asking such a question in this forum.
I would like to see more discussions on the subject as time goes by.
Good luck for your work.
Regards,
Dan

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Manshu July 14, 2011 at 6:05 am

Dear Dan,

Thank you very much for your kind words, they are much appreciated! The readers and discussions they generate here are phenomenal, and as you read more you will see that a lot of content is reader driven, both in terms of ideas, and in terms of input to posts too. In fact, some readers like Loney, Shiv, and Gurpreet who have subscribed to posts answer questions faster, and a lot more comprehensively than even I do!

Welcome, and I hope you subscribe to the free daily email.

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Dan July 14, 2011 at 9:43 am

yes im already subscribed to daily mail…!

I will update this forum once I have actual hands on experience dealing with these insurance companies….i am going to do a field resarch on this subject once in India.

hope that will be more informative to me as well as others.

takecare.

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Manshu July 15, 2011 at 12:55 am

That’ll be a big help – thanks Dan!

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Dan September 4, 2011 at 12:41 pm

Dear Manshu,

An update: (from Kuwait)
July 2011 – tried emailing Icici prudential Life Insurance for Term Insurance and they replied saying that their Financial Service Consultant (FSC) will contact me shortly and asked me for my contact details.

August 2011- I send a reminder to Icici and they respond in the same lines that our Financial Service Consultant (FSC) will contact me shortly.

as of today no one has contacted me from Icici.

However, I was contacted by one of the ICICI prudential Business partner who happened to be here in kuwait for some campaign, but he was not at all interested nor was offering term insurance plans, they are onlyinterested in other products like ULIPs.

Now, I have identified Metlife, kuwait for Term insurance and I need to clarify some concerns before jumping in:
1) if I take insuranec with metlife in Kuwait and later get back to India can this insurance be legalized or can the claim be processed in India?
2) will this be under the preview of Insurance Ombudsman in India.
3) it is very likely that in the vent of my death, my familiy will be in India and they will have to process the claim from india.

any way I will put forward this questions to the agent, but would like to seek your advise too.

Regards,
Dan

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Manshu September 5, 2011 at 6:10 am

Dan,

Looks like you had to jump through a lot of hoops to get insurance, and the process wasn’t as smooth as it should be – that’s really bad to hear. I’m afraid that I don’t have any inputs on these questions right now. I will research this a little bit and see if I can find some answers to these but this is the first time I’ve seen these questions and I don’t know anything about it.

Regards,

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Rajesh August 28, 2011 at 10:48 pm

Hello Everyone,

I have recently planned to take IProtect Plan (OPtion 1) from ICICI Prudential Pvt Ltd S.A. 30 Lakhs for a term of 30 Years i have a feeling if you buy insurance policy from any insurance company & if your policy is more then 3 years Old & you have paid all premium on time then 99 % your nominee will recd the claim smoothly also in case of early claims (less then 3 years Old) if it is natural death then 99 % chances your claim will be rejected please correct if i have a wrong feeling.

Thanks in Advance – Rajesh Varma

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Manshu August 29, 2011 at 5:12 am

Hi Rajesh,

Acc to the law – insurance companies have to prove that the claimant has engaged in fraud if the premium have been paid for more than 2 years, so that’s why you see that the rejection rate is so less for claims older than 2 years.

And the figure also show that the rejection rate is better than 99% even if the policy were less than 2 years old.

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chander shekhar September 9, 2011 at 11:19 pm

Hello Everyone,

I want to know if someone buy a online term plan from a private insurer and he move out of India after some time to work can his family members claim for his insurance in case he or she dies outside India.

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Rajesh September 10, 2011 at 8:38 pm

Hello Chandra Shekhar,

Please be informed yes Online Term Plan also cover death occured outside India provided the nominee complete all the formalities in India like buying the policy, submitting the claim apart from Original Policy most importantly the Death Certificate from the competent local authority have to be obtained from the place where the death have occured i hope i have responded to you query.

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Sumeet August 26, 2012 at 1:06 am

Hello Rajesh – I’ll be moving out of india for couple of years (for work). If i buy online term policy say with ICICI pru, will I be covered during my stay outside of india?

Thanks,
Sumeet

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Sahil September 19, 2011 at 2:26 am

good work manshu. i love to return to your site again and again. i opted for aviva online term plan and found them better than metlife and icipru. aviva all doc also submitted online by me. while the other two comp one is needed to visit the branch and face the brazen staff- they make you feel so awkward as you took policy online. most of the person will bear this behaviour but now no more. aviva is the fresh option and for me it worked good. i hope it’ll continvue to be the best for me in next 35 years :) from sahil – writing from a mobile

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Manshu September 19, 2011 at 9:03 pm

great to hear that – thanks and thanks for leaving this message and sharing your experience.

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Rajesh September 19, 2011 at 11:42 am

Hello Sahil,
I would just add some suggestions / comments from my end I agree that Aviva provides cheapest online term plan but have you checked their claim settlement ratio for previous years also its Balance Sheet has huge accumulated losses which have been carried forward from years on years anyways dont go by my words you can check it for yourself and give your feedback…………..

Also i have recently taken ICICI Prudential – I protect online term plan and it is 100 % online except the medicals also ICICI is no 1 in Pvt Insurers towards claim settlement ratio.

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Santosh September 28, 2011 at 5:34 pm

Mansu,

Thanks for the data. I would be curious to know under what circumstance the policies get rejected. One of the comments was that passive smoking detected in the blood. Would this be held as fraudelent claim if the insured does not disclose he has not smoked?
It would be good to know what kind of investigations companies do before paying up. In the rule you have mentioned, it says any information gathered from friends relatives which point to discrepancy. So would the company be following up with friends, referrers before settling?

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Manshu September 28, 2011 at 11:04 pm

If the policy is older than 2 years then the insurer has to prove fraud. I don’t know if someone can give a comprehensive list of fraud and it will depend a lot from one situation to another, and it’s going to be subjective. If a lot of nicotine is found in someone’s body and that guy died of lung cancer without disclosing smoking – then in such cases I guess yeah the insurer will try to find out if the person was a heavy smoker or not and they may contact the friends. But they don’t do that at the time of issuing the policy.

Also, if someone is planning to disclose information correctly then what difference does it make what investigative procedures the insurer uses.

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Chirag October 5, 2011 at 10:44 am

Aviva India has a better claim settlement ratio comparatively..
I am currently banking of Aviva India’s online term plan – Aviva i-Life..

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Rajesh October 5, 2011 at 11:17 am

Hello Chirag please visit below site link is given and check yourself the claim settle ment ratio and also check the Balance Sheet and Profit & Loss A/c for Aviva on their website you will come to know the truth………… and then comment on it ………

http://www.jagoinvestor.com/2010/12/term-insurance-plans-comparisions-india.html

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b.chakrapani reddy November 4, 2011 at 8:56 am

dear manshu
I settled for Aegon Religare- i term plan, and the moment I saw your wonderful job to understand the claims settlements of the insurers I withdrawn. I have to search for new insurer who will give policy after all medical tests. Please advise.
Pani

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Manshu November 5, 2011 at 7:14 pm

I’m afraid there is not a lot more that I can advise you on beyond this post – you have to look at the data and make a decision yourself.

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Nisha November 17, 2011 at 12:49 pm

Hi ,

I want to take a term plan of 50 lakhs and i am confused between Aviva and ICICI Pru and also there is a difference in premium , pls suggest

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Shreeps November 21, 2011 at 7:32 pm

This is a great website and lots of valuable information is available here for everyone.
I was looking at the various posts + data and a couple of things came to my mind:

1. Everyone says that LIC claim settlement % is highest. That may be true but how many of those claims are related to whole life / endowment (which I presume forms the bulk of LIC’s business) and how many relate to pure term plans? So what are the claim settlement ratios of these companies for ONLY term plans issued?

2. Do these percentages refer to the “number of claims” or “value of claims”. As an example: If an insurer has issued 8 policies 0f 1 lakh each and 2 policies of 10 lakh each AND the insurer rejects just one of the larger value policy claim, the claim settlement ratio would seem to be 90%. However as an amount rejected % (not sure of correct term) it will fall to around 65% I think.

3. That leads me to my third point of claim settlement ratio for “large” claims. We should get data on how many % claims are rejected for policies > 25 lakhs (or 50 lakhs or any other appropriate number). An unscrupulous insurer could make sure that the higher in number but lower in value claims are all paid off without any murmur but would question and repudiate higher value claims which would be lower in number. This would protect his bottom line and also not unduly affect the claims payout ratio.

I think the answers to these would be really illuminating.

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Manshu November 21, 2011 at 11:18 pm

That data is not available but as you see from the post above whichever way you splice the available data LIC comes out top.

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Shirish November 27, 2011 at 9:24 am

Dear Manish

If I buy 2 Term policies from 2 different companies, do my family get benefits from both the companies? Or there is some conflict?

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Manshu November 27, 2011 at 8:40 pm

Yes Shirish – both companies will pay.

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alex December 19, 2011 at 7:08 pm

hi,
This is an excellent article with lively comments all filled with information. I had taken a term insurance planning 4 years back and Iam surprised to see the lower premiums existing now for most insurance products. I am looking to take an additional cover and was scouting for advice on maintaining 2 TL Vs. 1 TL. After reading this blog, I have decided to go for additional cover (i.e. 2 TL). Thanks for the excellent info and keep up the good work.

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Manshu December 20, 2011 at 2:08 am

Thanks Neo! I think you might want to see if your insurer provides a top up policy and see what rate you’re getting that. You might just get a better deal there.

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Vineet Gour January 30, 2012 at 11:47 am

Hi Manshu / Group member
Could to tel me hiden aspect in SBI Life smart performer or HDFC Standard Life plan, They are coading Higher of highest NAV,Is it tru?What are hiden things?How will adjust it if DTC will come next year?

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Yogendra Pahariya March 3, 2012 at 7:42 pm

I ve bought two plans online (ICICI Pru & Aviva) and thinking of buying newly launched HDFC Life.
A query, Do one needs to notify term plan issuer while going for long term to work outside India?

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surinder kumar March 26, 2012 at 7:37 pm

helloo sir
i want to buy term insurance about 25lakh and i want advice that which company i should buy lic or other pvt company

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Mohit April 24, 2012 at 4:34 pm

Hi Manshu – great post. Thanks for your efforts.

by any chance – do you have latest consolidated claims settlement data for the companies – the one in this post is 15 months old, and it will be interesting to see how new breed of comapnies offering online insurance products have fared. Most new companies were 1-5 years old at the time of starting this post.

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Dsouza, james July 16, 2012 at 9:56 am

A point to note is that Term insurance is not necessarily the cheapest and best option. Many so called experts keep harping on this and I think people are not looking to see if it is incorrect.

First keep in mind that insurance is meant to provide financial protection to families.
So if a person can afford it a traditional wholelife plan is best. This is so as Term insurance is very costly and not at all cheap as age increases and is not given after age 65, though that fact is it is normally not given after age 50 by most insurance companies unless the person has exceptionally good health.
What is the use of a supposedly cheap plan when it does not cover you when you need it the most as most people after 60 stop earning apart fro mthe fact these companies do not pay claim while looking for reasons to decline?
On the other hand a good wholelife plan (from a good insurer) with premium holiday can cover you till age 100; the best thing is its cover keeps increasing year by year and you dont need to pay yearly forever like term plans.
Term plans are meant to cover loans etc and not suited to those who invest in the stock market?

One point to clear up though is that the settlement percentage is not necessarily due to rejection, but as many people do not come forward to claim, possibly as unaware of insurance policy. This is more so with LIC who has a huge base of customers.

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Manshu July 17, 2012 at 4:37 am

Can you please name a whole life policy that you consider good? I’d like to learn more about it. Thanks.

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Manoj July 21, 2012 at 11:51 pm

Thanks to everyone who has provided insights here. I would like to know from James which “Whole Life Policy” are you talking about ? Please provide some details. Regards.

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James July 22, 2012 at 8:03 pm

Manshu/ Manoj,
Before responding to your question, I would once again like to reiterate that Term policies are Not cheap (examples below) as advertisements show lower age rates without the numerous exclusions, they are ideally meant to cover loans.
*Example of LIC below for Rs 25 lacs for a 20 year term as they pay when the time comes, I find most private cos cheap Term plans not fruitful as high rejection at time of claims as they spend a lot to get business and many could be said to be a piece of waste paper.
Age 30 yrs, it is Rs. 6425/=
Age 35 it is RS. 8500/=
Age 40 it is Rs. 12025/= (if you took a 10 yr term then this is the rate now)
Age 50 it is Rs. 27250/= (if you took a 20 yr term then this is the rate now)
Age 55 you get only a 15 yr term & it is Rs. 34850/=
Age 60 you get only a max 10 yr term & it is Rs. 44200/=
If your previous term insurance period ended a few days after age 60, you do not get term insurance.
Loans too are not provided beyond age 65 or 70 if a home loan and has to end here.

Term policy is popular in the West, where despite their huge earnings they always have huge debts due to their lifestyle. So we think it’s good for us too and supposed experts with no real idea of finance advise this as they go on on about the money in the equity market (If it was that good continously why do the markets crash regularly and why is the PM himself asking fund managers of MF’s to buck up). Before being too happy that we are thrift and Westerners are not, note that Westerners do not like to save as their banks hardly pay them anything, as loans too are very cheap (eg; UK secured home loan from Hsbc is 2.64% and unsecured personal loan is 6.2% – there are others giving at slightly cheaper rates too – in India it is 3 times as much for both which is why banks pay higher interest rates and our economies are struggling as businesses cant take loans).

Whole Life policy:
About the whole life policy an example is LIC’s Jeevan Anand where the premium can be from 10 yrs min upwards to around 35 yrs, depending on age. The life cover on this keeps increasing each year.
*Though the policy matures say after 20 years as selected by you and you receive your money with bonuses, the Sum Assured continues again till age 100, and no medical is necessary at the vesting age you selected or anytime thereafter.
So if you can afford it then this type is best, you never know when the market crashes.
I hear wonderful talk at many offices of them dreaming how they have invested in MF’s or shares and will make money when you don’t pay the fund managers and crib – why would he take best decisions for you and really perform? If you really want to make money, learn to study the equity charts and invest directly in the NSE or BSE or gold, curreny et al; and yes before that cover your family as you never know even then…..!!!

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Manshu July 22, 2012 at 8:10 pm

Do you understand that even LIC invests in the stock market and if the market is down then their returns will get affected or do you think that they will somehow magically generate returns on these whole life policies that you talk about?

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Manshu July 22, 2012 at 8:23 pm

The Jeevan Anand page shows that you have to pay an annual premium of Rs. 4,535 for a cover of Rs. 1 lakhs for someone who is 35 years, so in your example that you’ve taken above, for Rs. 8500 odd you get 20 times that cover?

Further, the guaranteed benefit is the one lakh and the rest is all variable that largely depends on market returns my friend. You keep harping on the fact that this is lower cost than a term plan, but for anyone who can do a little Maths, they can see that they can buy a term plan, and save the remainder of the money, invest in some tax free bonds, or fixed deposits and generate a better return. Don’t even need to go to equities.

And this whole diatribe against equities and suggesting that since equities crash you should “invest” in insurance ignores the fact that LIC goes and buys equities too, that too PSU stocks that no one else is willing to buy. If equities do badly, then these whole plans will also do badly. They don’t have a magic bullet.

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James July 22, 2012 at 8:25 pm

Manshu,
We indeed find many of the so called financial forums really humorous as they provide advise by researching and then speculating. Then a few of them clear up for each other, a case of the blind leading the blind in the many online forums and columns.

LIC DOES NOT INVEST IN THE STOCK MARKET, THOSE ARE ULIPS AND I NEVER ADVOCATED THEM AND NEVER WILL, GO INVEST DIRECTLY IN THE EQUITY MARKETS – INSURANCE IS ABOUT INSURANCE OR FINANCIAL PROTECTION.
The example I gave is where LIC invests in Debt markets, which you guys as individuals cannot – tell me the last time the Debt markets really crashed, apart from minor bruises when the economy went down fully before bouncing back with higher returns.

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Manshu July 22, 2012 at 8:39 pm

I find it ridiculous to have to deal with insurance agents who peddle crap on OneMint and can’t form a coherent argument but there is no escape from that.

LIC in fact has huge equity investments that will affect its returns as you can see from their L12 statement. Link:

http://www.licindia.in/publicdiscloser/2011-12/122011/L-11,_L-12,_L-13,_L-14.pdf

As individuals, we can invest in debt market. Examples:

1. NCDs.
2. Tax Free Bonds
3. 80CCF Bonds
4. FMPs
5. Short term debt funds.

And this is precisely my point, that you can combine a term insurance and investments in tax free bonds or NCDs and get a higher cover and match returns (if not exceed) from this very whole life plan that you are talking about.

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James July 22, 2012 at 8:42 pm

Manshu,
You responded twice above and I did not see the 2nd response at 8:23 pm, indeed incorrect.
I have no idea where you got the Jeevan anand rates you mention for 1 lakh, I checked for 20 yrs it is incorrect and around 5800/=
I mentioned term plan rates.

You are completely confused with patches of incorrect info. – even Money control and many others do the same claiming to provide financial advise, alas completely incorrect.
Jeevan Anand does Not invest in the equity markets NOR does it give 20 times cover, those are Ulip Plans which invest in equities.
I never asked anyone to invest in insurance, please read again a bit slowly – Insurance is not about investment, it is about financial protection and wholelife and long term plans give returns in order to increase the life cover. Are you suggesting people should only invest in the stock market to make money and then their families go to roads when they lose all, the idea of sharks waiting to takeover their properties for cheap rates.

There was no diatribe and you should not say so if you provided incorrect advise previously. i do not think I will comment again here if this is the case. In fact earlier I have found ludicrous advise to people asking them to take high life cover and ensure very good returns – How can that be possible when higher life cover means more mortality charges, hencel ower returns?

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Manshu July 22, 2012 at 8:53 pm

This is the page for Jeevan Anand that you spoke about right?

http://www.licindia.in/endowment_005_illustration.htm

What is the premium here for a 35 year old for Rs. 1 lakh?
Illustration 1
Age at entry: 35 years
Sum Assured: Rs.1,00,000/-
Premium Paying term: 25 years
Mode of premium payment: Yearly
Annual Premium: Rs. 4,535 /-

How much do you think costs for a term plan for Rs. 1 lakh cover?

And I can’t believe I have to argue about LIC not investing in the stock market. It has huge stakes in Infy, ONGC, Tata Steel and what not.

And I never even once wrote about investing in equities here, I said you can invest in debt and mimic the variable returns (variable mind you not guranteed) and then you said that individuals can’t invest in the debt market. For which I gave you a few examples where individuals can

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James July 22, 2012 at 8:47 pm

The advise provided in these columns via the advise is crap, without a real understanding and just trying to make the forum popular so you can make money – from others losses.
I never said you cannot combine a term insurance and investments in tax free bonds. I will not be responding again as your advise is muddled and your forum misleading people.

I advocated a idea not a must should and your later comments are trying to confuse the issue as incorrect advise provided initially by one-mint.

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Manshu July 22, 2012 at 8:59 pm

Yes obviously, people who are writing about products and NOT selling anything to make fat commissions on products are the ones giving crap advice leading people to losses.

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James July 22, 2012 at 9:03 pm

Manshu,
No product was provided over around 5 days until you guys kept asking for it.

Once again, LIC debt market plans are not invested in equity markets, you are showing links of something else to prove incorrect advise is correct as most people will not check.
What you refer to as debt market is something else.
Due to mags like one mint and various others with so called experts criticizing LIC unduly and without really knowing, in about a month and half they will be collecting service tax instead of covering them, currently at 12.36% – now talk about returns when paying taxes on your bond payments.
one mint is being made popular with incorrect advise and mixing up things and confusing peoples minds, showing themselves to be experts, which they are not to make huge money from the advertisements.

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Manshu July 22, 2012 at 9:13 pm

It is a theoretical argument if you can’t show a product that can help achieve what you are saying. That’s why the request to show a product.

When you showed a product, I gave the link for that product’s costs and benefit returns. How is that misleading?

You wrote that LIC doesn’t invest in the stock market, and I showed you a link in LIC’s website which is its disclosure document that shows how big of an investor it is in the stock market.

How is that misleading?

You talk about me criticizing LIC but if you go back to my own post you will see that I write about their term plan favorably and in other posts I have also mentioned that I have a term plan from them.

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James July 22, 2012 at 9:39 pm

Manshu,
For the last time I comment, after that write whatever you want, its your mag – you win.

There is nothing theoretical about whole-life plans, all cos have them and around for years.

The product’s costs and benefit returns you provided is incorrect, god knows how and where and what you do.

I wrote that whole life type plans do not invest in stock market (as they do in institutional debt markets) – but you showed a link to a Ulips plan which is completely different.
*They are different departments and the money is not mixed as you did the links. You showed incorrect links as you said they give 20 times life cover and all about equity linked plans to claim you were an expert. Clearly you were not aware as previous advise in columns too along the same while providing supposed expert advise.

Who does not make money, don’t you, don’t people who go to offices, in businesses, hospitals, hotels – do you live on social service income, so your unbecoming comments of possibly some agents being directed at me was incorrect.

Once again, you avoid the point with all sorts of statements, when the term plan ends what do you do for financial cover, with nothing pray something wrong does not go wrong. How do you say this is incorrect? this is only as…

..one-mint makes money from ads and needs more people to visit the site – people think as you are not from a bank or insurance company it must be un-biased and correct, only to realise years later!!!!!!!

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Manshu July 22, 2012 at 9:59 pm

I’ll take the term plan with the max maturity, and the difference in premium (compared to any insurance that pays you back) will ensure that I come on top in 25, 30 or 35 years maturity.

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James July 22, 2012 at 11:10 pm

Why do you say in different words what I said? About the difference in premium, I said initially if people who could afford or those who invest in stock market should have an insurance cover of a whole life policy as they obviously have money.
*Insurance is not about making money but financial protection at crucial times.
* Financial experts, real ones always advise that you ensure you have taken adequate coverage for life, health and four months daily expenses, as money in equity markets should be that money you can afford to lose. Each time markets crash, there are numerous stories of riches to rags due to incorrect advise trotted out by so called experts.

You may win today with the term plan, but I reiterate again which you don’t want to address, after age 50-60 what will you do?
Leave it to god I suppose so and hope nothing goes wrong and your wonderful stock market does not crash or damn the family when your not around – let them go to the dogs, is it?

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Manshu July 22, 2012 at 11:12 pm

Let’s talk numbers please. Say I’m 30 years old and need a cover of Rs. 25 lakhs. Being an expert, can you give me a quote for the annual premium for a whole life policy and a term policy?

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James July 22, 2012 at 11:19 pm

Talking numbers all the time does not answer questions. It’s nonsense and misleading people, when term policy does not cover you after 70, assuming you have taken it in time, if taken at huge rates after 50 or 60 if earlier one lapsed, which it does.

I am talking of complete coverage even at a age term policy is not available and securing family with financial cover, you are talking of them being in distress if there is a market crash at a late age. History has proved time and again market investment has huge risks.

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Manshu July 22, 2012 at 11:22 pm

Alright James, I appreciate this conversation, and I think it’s for people to read these arguments and decide for themselves what to do. Thanks for your time and patience in responding to me.

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ankurm July 22, 2012 at 11:31 pm

James is assuming there is no threat to life before 60-65.

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James July 22, 2012 at 11:52 pm

Manshu,
Thanks, you have been an absolute sport and I agree we ought to wind up.
However I do not want this interaction to be incorrectly considered – so guess what, I will give you the numbers hopefully by tomorrow else as soon as possible, as got to sleep to now for life’s battle tomorrow.

I don’t blame you for asking the question of numbers as you may have been influenced by many online so called financial mags trying to make themselves popular, with this question to put down opposition.
I will not give a response what you have in mind (half baked), but will answer your question exactly to the point, I will not disappoint you………….chuckle, chuckle -mirror on the wall, please reflect the picture of what it really is.

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Shiv Kukreja July 23, 2012 at 2:19 am

I need an insurance when my untimely death would create a financial burden on my family. If a private insurance company refuses to cover me beyond the age of 70-75, what is wrong in that ?? Why do I need an insurance cover at around an age when I’m quite near to death and dont have any financial liability ?? Insurance is required when there are financial liabilities on me like home loan, car loan, child education/marriage etc. If the liabilities are there on me at the age of 75, then I did not actually plan in a correct manner throughout my life.

Nothing is free in this world except things which God has given us. I dont think 99% people need life insurance cover to be there beyond an age of 65 years. If a company like LIC is giving life cover till the age of 100 in any of its plan, then it is assuming that the company will eventually have to pay the claim to approximately 9999 people out of 10000 covered. Then, if LIC’s actuaries are wise and I’m quite sure they are, they will definitely add the cost of paying all these claims in my insurance premium. So this way I’m paying that extra cost throughout my life which the company is paying back to my family on my death.

Nobody here is against LIC. But the point is Term plans are considered as the best plans for one to get insured probably because they provide value for money as far as insurance is concerned. For return on investment, there are various other things which provide better returns as compared to whole life policies and it is a proven historical fact that equities give the maximum returns as far as investment is concerned.

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James July 23, 2012 at 11:50 am

Manshu,
I see can you cannot wait and have good colleagues to twist things to what I never said or meant.
Also I never said not to criticise LIC, I only spoke of a plan, which all cos have copied. All cos have stupid or money making plans not in tune with insurance or what it was meant to be, as far LIC goes I would say some of the plans are stupid as they are not there to make profits, except marginal to make the below payouts. which Shiv seems to think they do from their pockets – by error he was right.
Please wait before jumping on me for the nos, I will calculate both plans till age 100 as you asked, while wholelife stops after 20 or 35 premiums and is returned with bonus, term plans are not paid back and cost huge at a later age.

ankurm – I never assumed any age limit, its you guys who are advising term insurance as you make wild claims of stock market investment when they do debt markets for the plan I advocated and sorts of other claims and forget its only till age 65-70.

Shiv – if you do not want after that age please don’t go for it but don’t mislead people who will not find it available later if they go in for term insurance only – give them the options.
Also you use crass and cheap language – no one is dead after age 70-75 – ask the older people. Captain Nair started one of the biggest hotel industries around that age and is now 90 and going great guns. If banks do not give loans after that age it does not mean they do not have liabilities?
If you do not care about your older people, let it go, all are not the same.
The rest of your conclusions that LIC has to give to all older people shows your non-understanding of insurance and just some wild talk – its not some magic that LIC does, that’s the way insurance works and why its called so as its a social responsibility.

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Shiv Kukreja July 23, 2012 at 6:54 pm

:-)… “have good colleagues to twist things”… “All cos have stupid or money making plans not in tune with insurance”… “as far LIC goes I would say some of the plans are stupid”… “you make wild claims”… “your non-understanding of insurance and just some wild talk”…

James, I’m wondering where did I use cheap language… :-)

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ankurm July 25, 2012 at 12:15 am

You need for insurance highest when your human capital (PV of future employment earnings) is highest, that is when you are working. Insurance is meant to replace present value of your future earnings (when you die) and cover your dependents. Post 60-65, your entire wealth is financial capital, human capital is zero. Financial capital is enough to cover that risk.

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ankurm July 25, 2012 at 12:21 am

@James: i was never in any discussion, I am just inferencing from your comments,. Then, how can you say “you guys who are advising term insurance as you make wild claims of stock market investment when they do debt markets”. By the way i have taken all insurance products: term insurance, whole life and endowment plans, and consider taking term plan the most wise decision. The sort of risk you are covering from whole life plan, can anyways be covered by a normal retirmenet plan like PPF at a better return. Wheres the hue and cry about it.

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James July 24, 2012 at 9:54 am

Shiv – using the word ‘stupid’ is not cheap, it is describing something, which you would have done in worse language.

It is not necessary to behave like you know nothing as to your cheap language – read you post and my subsequent comment on you describing and alluding that people over 70 are almost dead, have no life, should have no liabilities – that is cheap.
Go on confuse people with incorrect info, scare them so they click on your ads and you laugh all the way to the bank.

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ankurm July 25, 2012 at 1:06 am

At the age of 70, there are two risks; i) coverage of health expenses, which is covered by health insurance and not the products which we are discussing ii) risk of outliving ones assets (risk of living too long..opposite of insurance), this is covered by taking annuity product. You take insurance to leave money behind for your dependents (replace your earning capacity), at 70+ you should dont have any dependent, but you yourself are a dependent. So you need money as long you live (not when you die), which is covered by annuity and not whole life.

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Yogendra Pahariya August 2, 2012 at 11:43 pm

I also think term plan is wise option and insure you in true sense. You can choose various financial products as an investment.
But not all term plans all cheap. However, mostly all ON-LINE term plan products are available cheap online from private players. To name a few…
ICICI Pru – iProtect
HDFC – Click2Protect
Aviva

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Anon August 20, 2012 at 3:06 pm

Hi Manshu – any update on the latest figures for this year – looking fwd to having the latest figures

Since you write the article, HDFCs Click2Protect has become popular – do have any figures for 2011 or 2012??

@Shiv – your posts here at One Mint are extremely informative

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Manshu August 20, 2012 at 7:48 pm

I haven’t looked at these numbers for a while and given how time consuming this is, I don’t think I’ll be able to write about this topic in the near future….

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Shiv Kukreja August 20, 2012 at 11:14 pm

Thanks Anon!

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Santosh September 5, 2012 at 8:07 am

Hi Manshu,

Another parameter where I am certain there is a skew is the amount insured. Do 1Cr plans get rejected more often than plans worth less?

You’ve been analyzing this data so carefully, that is a real bonus for me in helping me make my purchasing decision.

Cheers,
Santosh.

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Manshu September 9, 2012 at 5:00 am

That is of course a good idea but I don’t think anyone breaks out the data to that level for us to analyze if claims of over a crore get rejected more frequently.

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Kishan M N September 9, 2012 at 4:23 am

Please clarify if these claims are only death claims or including maturity claims. If it is including maturity claims, it does not make any sense. Since all maturity claims are always paid, the biggest player LIC will have the least rejection% as per your definition.

Can you get us pure death claim rejections only?

Thanks.

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Manshu September 9, 2012 at 4:29 am

Term insurance does not have any maturity so this is what you’re calling “death claims”.

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Kishan M N September 9, 2012 at 5:50 pm

That’s right, Manshu.

To the best of my knowledge published information does not provide the break-up between death claims and maturity claims for all insurers. So it does not make sense to compare ‘claim rejection rates’ since maturity claims are included in the denominator for large companies like LIC.

Since Term Insurance has only death claims and not maturity claims, and since maturity claims are hardly rejected, the ratio will be skewed for such companies with high maturity claims.

Hope you are getting the point. I am unsure how claims rejection ratio is defined, given this perspective.

Thanks, Manshu.

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Manshu September 9, 2012 at 8:33 pm

No that’s the opposite of what I am saying Kishan – these are claims for term plans *only* so that means they are only death claims as you describe it.

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Kishan M N September 10, 2012 at 1:00 pm

Ok.

Thanks for clarifying, Manshu.

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Puneet Bansal December 14, 2012 at 10:46 am

Can you please help me regarding the data for SBI life TERM Insurance. aS LIC plans are too expensive. My Age is 32 & for 1 Cr Cover, Premium is coming to Rs 35000 Per Annum, Whicle Other’s are offering at a lower rate. But SBI is also a Govt Player & Premium amount is also lesser than Rs 18000. So, I go for it?? Or Should I stick with LIC??

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Prashant December 21, 2012 at 11:57 am

Hello;
Can you please once again share source to the information mentioned above so that i can share the same with my friends.

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Manshu December 21, 2012 at 5:46 pm

This post is a little dated so I’d recommend you not sharing these quotes with anyone and do your own new research.

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anubhav February 20, 2013 at 10:59 am

Manshu,
just wanted to point out something which i feel is amiss here or maybe its there and i missed it..
this analysis made me think that Aegon religare or for that matter few others too …are really bad at paying the claims..which means that one shouldnt opt for them and opt for others who have a better claim payout ratio.
now, since i work for an insurance org..which is there in your list..one of the major reasons for denying of a claim by an org..is hiding of data while buying insurance..apart from this reason..a term plan claim getting rejected is nearly impossible…
infact, if you look at the online term policies, where more educated people buy and buy honestly, the claim payout ratios are better than the state run insurance companies.
and i have not got the data to back-up..but i am pretty sure that this hypothesis will hold.
so, i guess we cant club entire insurance world as one..we will have to make segements and treat each of them separately.

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Manshu February 20, 2013 at 5:46 pm

Thank you for your comment. I would imagine that people hiding data or otherwise is the same for LIC or any other company, then why the difference? Can it be explained by tighter procedures by the private companies?

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