LIC most consumer friendly life insurance company

Life Insurance Corporation of India (LIC) remained the most consumer friendly insurer in the country, and has outdone its peers both in the public and private sectors in most parameters.

LIC, with over 72 per cent of the country's life insurance market, had fewer lapses, higher claim settlement and no penalties from the regulator.

The claim settlement ratio of LIC was better than that of private life insurers. Its settlement ratio increased to 97.73 per cent in FY13 from 97.42 per cent in the previous year while the percentage of rejections declined to 1.12 per cent from 1.30 per cent last year.

Private insurers on the other hand, reported a dip in settlement ratio to 88.65 per4 cent from 89.34 in FY12.

"Private insurers had repudiated more number of claims when compared to LIC. The percentage of repudiations (by private insurers) was 7.85 per cent, almost unchanged from 7.82 per cent in FY12," the Insurance Regulatory and Development Authority said in its annual report for FY13 released on Wednesday.

In terms of persistency of business too, LIC scored better with a lapse ratio of only 5.6 per cent as against private life companies, which are all in double digits ranging from 17 per cent to 42 per cent. The only exception is HDFC Life Insurance, which has a lapse ratio of 5.6 per cent.

IRDA measures lapse ratio as the number of policies lapsed during the year divided by the average of the policies in force at the beginning and end of the year.

The 13-month persistency (policies which are renewed after a year) is the highest for PNB Metlife at 71.22 per cent, but on a much smaller business. LIC, Max Life Insurance and IDBI Federal Life Insurance have a 13-month persistency of 70 per cent. For other private companies, the ratio ranges from a low of 36 per cent to 69 per cent.

Private insurers scored higher only on commission ratio with only 5.7 of total premium as commission compared to 7.08 per cent for LIC.

LIC, however, reached out to more people selling more policies to the lower middle class with an average premium per policy of Rs11,143. Compared to this, the private life insurers generated an average premium of Rs24,457 per policy.

Also LIC agents on an average sold 29 policies in FY'13 against only three that agents of private companies managed to sell.

In FY13, insurance regulator IRDA imposed penalties on 12 companies, including two public sector non-life insurers, for various reasons. The penalties ranged from Rs5,00,000 to Rs1.4 crore. However, LIC did not face any penal action.