The IRDAI has released its annual report for FY 2024-25, containing the definitive claims settlement data for life insurance companies. For term insurance buyers, this data is critical because claim settlement is the only metric that ultimately matters. A term policy with a low premium but a poor claims record is worse than worthless. Here is what the data reveals.
Overall Industry Performance
The life insurance industry's overall claim settlement ratio for individual death claims stood at 98.4% in FY25, up from 97.8% in FY24. This aggregate figure, however, masks significant variation between insurers. The top performers settled above 99%, while the bottom quartile ranged between 93-96%. The absolute number of claims rejected also varies enormously. LIC, with 99.6% settlement, rejected approximately 2,500 individual death claims out of 6 lakh total. A smaller private insurer with 96% settlement but fewer total claims may have rejected a similar absolute number despite a lower volume base.
Key Findings for Term Insurance
For pure term insurance policies specifically (excluding group and savings policies), the settlement ratio is generally 2-3 percentage points lower than the overall figure because term claims involve higher sum insured amounts and therefore invite more scrutiny. The leading performers in the term insurance segment are LIC (99.2%), HDFC Life (98.8%), ICICI Prudential (98.4%), and Max Life (98.1%). Newer entrants like Aegon Life and Digit Life show settlement ratios below 95%, though their data is based on a smaller claim sample and should be interpreted cautiously.
The most common reasons for claim rejection remain non-disclosure of pre-existing health conditions (68% of rejections), income misrepresentation (15%), and policy lapsation due to premium non-payment (12%). Fraudulent claims account for approximately 5% of rejections.
What This Means for Buyers
When purchasing term insurance, prioritise insurers with claim settlement ratios above 98% and a track record spanning at least 5 years. Be meticulous about health disclosure during the application process. The most dangerous mistake a term insurance buyer can make is hiding a pre-existing condition to get a lower premium. This almost guarantees claim rejection at the worst possible moment.
Consider the insurer's claims difficulty beyond the settlement ratio. Some insurers settle claims quickly (within 30 days) with minimal documentation hassle, while others with similar settlement ratios drag the process over 90-180 days, causing immense stress for bereaved families. IRDAI now mandates settlement within 30 days of complete documentation, but enforcement remains uneven.
Source
IRDAI Annual Report FY 2024-25, Life Insurance Claims Data