Author: Ankita Sejpal

LIC was formed in the year 1956 when the Life Insurance Corporation Act was passed to nationalise life insurance business in India. From 1956 to the year 2000 LIC was the sole life insurance provider in India enjoying monopoly position. Though other private insurance companies entered the insurance segment from 2000, LIC retained its leading market position. Even today, LIC has the largest market share among other life insurance companies and enjoys the trust of more than 250 million customers.

LIC offers a range of life insurance products like term insurance, endowment insurance, money back plans, child plans, unit-linked plans, etc. Even health insurance plans are offered by the company which help you meet the rising medical costs of common ailments. All the plans offered by the company have very good coverage benefits and the premiums are also low. Even in the case of claims, LIC believes in settling its customers’ claims quickly and efficiently. This is the reason why the company has been consistently enjoying a high Claim Settlement Ratio. Do you know what the ratio means?

What is Claim Settlement Ratio?

Claim Settlement Ratio (CSR) is the percentage of claims which an insurance company settles against the total number of claims made on it in one financial year. For instance, if, out of 100 claims in a financial year, the insurance company settles 95 claims, the CSR would be 95%. If the ratio is high it shows that the company settles the maximum of its claims and it is a good indicator.

LIC Claim Settlement Ratio history

As stated earlier, LIC has maintained a good CSR over the years and this is one reason why customers trust LIC. Here are LIC Claim Settlement Ratio over the last few years –

As can be seen from the above table, LIC maintained a ratio of more than 98% in most of the financial years leading the claim settlement race among other insurers. This shows that the company honours its claims without fail.

Analysis of LIC Claim Settlement Ratio of 2017-18

In the last financial year of 2017-18, LIC Claim Settlement Ratio was quite high at 98.04%. Out of the claims received under 739,082 policies, LIC settled claims under 724,596 policies thus having such a high ratio. The company rejected 0.67% of its claims while 0.08% of the claims were still pending when the financial year ended. 1.21% of the claims were unclaimed by the policyholders. Out of the claims settled during 2017-18, here’s the claim turn-around-time followed by LIC –

• Claims settled in less than 3 months – 45.17%
• Claims settled in 3 months to less than 6 months – 44.64%
• Claims settled in 6 months to less than 12 months – 3.51%
• Claims settled in more than 12 months – 6.68%

LIC has been operating since the last 60 years and more and has built up a good claim settlement department which helps the company settle most of its claims. This high claim settlement record also garners trust among policyholders who favour LIC for their insurance needs. So, if you are considering buying a life insurance policy, you can trust LIC and choose a suitable plan for your coverage needs.

Frequently Asked Questions

1. Does claim settlement ratio measure the amount paid in claims?
   No, the claim settlement ratio is used to measure the number of policies under which the claims have been paid. The ratio has nothing to do with the amount of claim paid by the insurance company.
2. What is the meaning of pending claims?
   The claim settlement ratio is calculated by considering the number of claims settled by the insurance company in one financial year. If, however, a claim has been made on the insurance company and the company is unable to settle it within the completion of the financial year, the claim which has been made would be considered a pending claim. The insurance company would carry forward the claim to the next financial year and settle it in that year.
3. If an insurance company has a low claim settlement ratio does it mean that the company is bad?
   No, a low claim settlement ratio does not necessarily mean that the insurance company is bad. There might be some reasons for a low ratio. For instance, most of the company’s claims could have been made in the last days of the financial year which the company could not settle within that year itself. This would make such claims pending and reduce the claim settlement ratio.
4. Who publishes the claim settlement ratio?
   The Insurance Regulatory and Development Authority of India publishes the claim settlement ratio of all life insurance companies for each financial year.

You must have heard the name of IRDAI in the context of insurance. Many of you have the basic understanding that IRDAI is the insurance regulator but is it all there is to know about it?

While it is true that IRDAI is the regulator of the insurance sector, you should also understand its role, duties and the powers that it has over insurance companies. So, let’s understand the history of IRDAI and its roles and duties.

Establishment of IRDAI

Prior to the year 1999, the insurance segment was solely controlled by the Government of India and Government-owned companies were allowed to sell insurance products. In 1993, the Government formed the Malhotra Committee to recommend reforms in the insurance segment so that the segment can be made more productive. The Committee recommended liberalisation of the insurance sector which would allow private companies to enter the insurance market. However, if private companies would enter the insurance market, it would become necessary for an authorised body to monitor and govern the workings of the insurance companies.

This reason paved the way for the establishment of IRDAI. In the year 1999, the Insurance Regulatory and Development Authority Act was passed which established IRDAI as an autonomous body for governing insurance companies. Later on, in April 2000, the Insurance Regulatory and Development Authority of India (IRDAI) was established as a statutory body for the insurance segment. Today, IRDAI has its headquarters in Hyderabad and is chaired by Mr Subhash Chandra Khuntia.

The objective of establishing IRDAI

The Insurance Regulatory and Development Authority Act was passed to create IRDAI so that –

1. The interests of policyholders would be protected
2. The insurance industry can be regulated and promoted
3. The insurance industry can grow orderly without any ambiguity

Duties and powers of IRDAI

Today, IRDAI is the apex body which governs all aspects of insurance. Though the Insurance Act, 1938 lays down the rules and regulations for insurance companies, IRDAI ensures that insurers follow the rules prescribed under the Act. Moreover, IRDAI also monitors the insurance sector and makes changes in the rules prescribed under the Insurance Act so that the insurance sector can adapt to the changing needs of society.

IRDAI is tasked with various duties, functions and powers under Section 14 of the IRDA Act 1999. These powers and duties are as follows –

1. Issue and renew certificates of registration to insurance companies so that they can sell insurance. Moreover, IRDAI also has the power to suspend, cancel, withdraw or modify the certificate of registration which it had issued
2. IRDAI has to protect policyholders’ interests in matters of assignment, nomination, claim settlements, insurable interest, surrender value which they can receive and other terms and conditions of the insurance policy
3. The eligibility criteria, the requirement of training and examination for insurance agents is fixed by the IRDAI. It also lays down the code of conduct which insurance agents are expected to follow when selling insurance policies to individuals
4. The IRDAI also specifies the code of conduct which should be followed by loss assessors and surveyors of the insurance company
5. It is the duty of IRDAI to promote efficient insurance growth
6. IRDAI inspects, audits and collects relevant information from insurance companies and other organisations which are connected with the business of insurance. This is done for monitoring purposes to ensure that companies and organisations are following the prescribed IRDA regulations in conducting their business
7. The manner of preparing the books of accounts and financial statements of insurance companies as well as their intermediaries is specified by IRDA
8. IRDAI has to oversee that insurance companies invest their funds as per the rules prescribed under the Insurance Act, 1938
9. IRDAI also regulates the solvency margins of insurers. It ensures that insurers maintain the minimum solvency margin as specified in the Insurance Act, 1938. Solvency margin is the rate by which the insurer’s assets exceed the liabilities. A high margin is favourable as it depicts a strong financial standing of the company
10. The minimum percentage of the insurance business which must come from the rural and social sector is specified by IRDA. Both life and general insurance companies are expected to meet the prescribed minimum business requirement from rural areas by selling micro-insurance policies

Besides these roles and powers, IRDAI is free to exercise any other power as it might see fit for the regulation of the insurance industry.

Unique rights of IRDAI

Though IRDAI performs the above-mentioned duties and has different powers, here are some of the unique rights of IRDAI –

1. IRDAI also promotes as well as regulates other professional organisations which are connected with the business of insurance or reinsurance. These professional organisations might also receive a percentage of the premium income of the insurance company for promoting and regulating themselves. The IRDAI specifies this percentage which insurance companies have to pay
2. As per the provisions of Section 64U of the Insurance Act, 1938, most of the rates and terms of general insurance business are regulated or controlled by the Tariff Advisory Committee (TAC). However, if, in certain cases, the TAC cannot control the rates and terms, IRDAI can control and regulate such rates and terms
3. In case of any disputes between the insurance companies and their intermediaries, the IRDAI can step in as an adjudicator
4. The functioning of the Tariff Advisory Committee is supervised by the IRDAI.

To sum up

All said it is quite clear that IRDAI is like to principal of the school called the insurance sector. It is tasked with the duty to ensure that the sector functions smoothly without any hitches. Moreover, through amendments and IRDAI regulations, IRDAI continuously makes changes in the insurance rules so that the insurance industry can keep pace with the changing needs of individuals. So, if you are worried about trusting an insurance company, relax. The company is governed by the rules of IRDAI and is genuine. You can also raise any complaints that you have with your insurer with IRDAI and it would help you get your grievances resolved.

Frequently Asked Questions

1. Can I approach IRDAI for grievance redressal?
   You should initially try to redress your grievance through the insurance company’s internal grievance handling department. But if you are dissatisfied, you can approach the IRDAI and it would help solve your disputes.
2. Are agent licenses given by IRDA?
   Yes, the licensing of agents is under the purview of IRDAI’s duties. It issues the licenses to eligible agents who clear the prescribed insurance exam. This duty was incorporated through the IRDA (Licensing of Insurance Agents) Regulations which was passed in the year 2000. These IRDA regulations contain the rules for applying and availing an agent’s license.
3. Does IRDAI protect the policyholder’s interests?
   Yes, it does. IRDA passed a resolution in the year 2002 for the same. This was called IRDA (Protection of Policyholders’ Interest) Regulations 2002. These IRDA regulations lay down the rules which insurance companies and their intermediaries should follow to ensure that the policyholder’s interests are protected at the time of sale of the policy as well as at the time of claims.
4. How to lodge a complaint through IRDA?
   The IRDAI has established the IRDA Grievance Redressal Call Centre (IGCC) which is a channel for lodging your complaints. You can call the toll-free number of the call centre which is 155255 or 1800 4254 732. Alternatively, you can also send an email to complaints.irda.gov.in to register your complaints against insurance companies or their intermediaries.

Technology has made our lives easier. Today you can do everything at the click of a button whether you want to buy, invest, get a loan or connect with your loved ones. Technology has revolutionized the way we live our lives and the world is gradually shifting to a digital age when everything would be accessible online. Even in the case of insurance, the online medium has made buying insurance policies easier and simpler. Today, you can buy all types of insurance plans online through your Smartphones or computers. These online insurance policies are called e-insurance policies and they provide you instant coverage. Moreover, to keep up with the advancing digital age, you can also store your insurance policies online in an e-insurance account. Do you know what it is and how it works?

What is an e-insurance account?

An e-insurance account is an online depository account which acts as a vault for your insurance policies. It is also called eIA or Electronic Insurance Account. Your insurance plans can be stored in soft copy in your e-insurance account. You can then access the details of your existing insurance policies by logging into your account and checking them.

What are the e-insurance policies?

The policies which are stored in the e-insurance account are called e-insurance policies.

Features of e-insurance accounts

E-Insurance accounts have the following salient features –

1. The accounts can be opened easily through any of the approved repositories in India
2. You can store the insurance policies of your whole family in the account
3. The account can be used to store any type of insurance that you buy for yourself and your family
4. You can have only one e-insurance account in your name
5. There is a unique number allotted to your e-insurance account. This number helps in identification of the account and can be used for any type of correspondence with the insurance company
6. When you buy a new insurance policy, you can provide the insurance company with your existing e-insurance account number and the company would send a copy of the policy to your account
7. Your e-insurance account would have a unique user ID and password using which you can log into your account any time that you want to access your insurance policies
8. Opening of the account is completely free of cost

Top #7 Benefits of an e-insurance account

An e-insurance account is a futuristic way of storing your insurance policies in one place. It provides various benefits which are as follows –

1. Since the policies are stored in an electronic format in the e-insurance account, they are safe from being lost, damaged or stolen
2. You would be able to access your e-insurance account anytime, anywhere by simply logging in to it. Thus, the information of your insurance policies would be at your fingertips, literally, as you can check the relevant details whenever you want. This is extremely helpful in case of claims when you require the policy number and policy details to register the claim immediately
3. Your e-insurance account is opened after your KYC verification has been done. As such, whenever you buy a new insurance policy, you don’t have to submit your KYC documents every time. You can simply quote your e-insurance account number and the insurance company would be able to access your KYC details online. This reduces unnecessary paperwork and helps you buy a policy easily
4. The e-insurance account is very convenient and flexible as it allows you to store every type of insurance policy that you buy for yourself as well as your family members
5. Online premium payments can also be done easily through your e-insurance account
6. You can monitor, review and track all your insurance policies easily and conveniently as they are stored at one place
7. In case of a change in the contact details or address, you can update your e-insurance account and the change would automatically be recorded in your insurance policies as well

How to open an e-insurance account?

If you want to open an e-insurance account, the process is simple. You would have to approach any one of the approved insurance repositories for opening the account. The Insurance Regulatory and Development Authority of India (IRDAI) has approved four companies to act as insurance repositories for the opening of e-insurance accounts. They are as follows –

1. Karvy Insurance Repository Limited
2. CAMS Repository Services Limited
3. NSDL Database Management Limited
4. Central Insurance Repository Limited

After you choose the preferred repository, the process to open an e-insurance account is as follows –

1. Download the form for opening the e-insurance account. This form can be availed from the chosen insurance repository, an insurance company or from an Approved Person.
2. You would have to fill-up the form and submit it along with the required set of documents
3. The submission of the form and the documents would have to be done at the nearest office of the chosen repository
4. Once all the documents are submitted and they are verified, you would be issued a user ID and password with which you can register your e-insurance account

Documents required for opening e-insurance accounts

To open your e-insurance account, you should submit the following documents –

1. Your recent, coloured, passport-sized photograph
2. A cancelled cheque of your bank account which contains the details of the bank and your bank account number
3. Self-attested copy of your identity proof like your Voter’s ID Card, PAN Card, Passport, etc.
4. Self-attested copy of your address proof like utility bills (not more than six months old), driving license, passport, Aadhar Card, etc.
5. Self-attested copy of your age proof like Voter’s ID Card, Aadhar Card, Passport, birth certificate, etc.

So, what are you waiting for? Create an e-insurance account and store all your policies in one place. It is convenient, easy and even free of cost. Once stored you would have all your insurance-related details at your disposal without having to search for them. Wouldn’t it be great?

Frequently Asked Questions:

1. Who is an Approved Person?
   An Approved Person is an individual who has been appointed and authorised by the insurance repository to provide services of opening e-insurance accounts to interested individuals.
2. I don’t have any insurance policy. can I still open an e-insurance account?
   Yes, you can. Having an existing insurance policy is not a criterion for opening an e-insurance account. The account can be opened by anyone whether or not they have bought insurance.
3. Can I store my commercial insurance policies also in the e-insurance account?
   Yes, you can store even commercial insurance plans in the e-insurance account as the account does not have any limitations on the types of insurance policies which can be stored in it.
4. After submitting the documents, how long would it take for the account to be opened?
   The e-insurance account would be opened within 7 days of submission of the opening form and the relevant documents.
5. Can existing policies be converted to e-policies and stored in e-insurance account?
   Yes, you can ask the insurance company to convert your existing insurance policies to e-insurance policies and store them in your e-insurance account.
6. What would happen to the e-insurance account if I die?
   When you open an e-insurance account, you would have to appoint an authorized representative who can access your account in case of your death. The name of the representative should be mentioned in the account opening form. If you die, the authorized representative would be able to access your e-insurance account and get the details of your insurance policies.

Investments are a must if you want to create wealth and multiply your savings. Investments also help you meet your future goals as what you invest today accumulates into a corpus in future. that is why almost everyone invests their savings into different investment avenues which suit their risk appetite and investment strategy. If you don’t mind taking risks and want to invest in avenues which give you returns linked to the market, there are two investment options which are quite popular – ULIPs and Mutual fund SIPs. Many investors believe that both these avenues are the same. Alternatively, many investors know that these avenues are different but the differences are not very well known. So, let’s study the concept of ULIPs and SIPs, understand their differences and find out which one to choose –

What is ULIP?

A Unit Linked Insurance Plan, ULIP, is a plan of insurance which provides life insurance cover as well as investment returns. When you invest in ULIPs, the premiums paid are invested in different types of funds. these funds, in turn, invest their corpus in different types of market-linked securities. thereafter, as the market performs your fund value changes. In case of death during the term of the policy, the higher of the fund value or the sum assured is paid. this ensures optimal insurance coverage even if your investments are not enough. When the plan matures, however, the available fund value is paid. ULIPs, therefore, give insurance coverage over the policy tenure as well as investment returns on maturity.

What is SIP?

SIP stands for Systematic Investment Plan. SIPs are a type of mutual fund investments where you invest your money in a chosen mutual fund scheme regularly at specified intervals. You can invest small amounts monthly or after any period and create a good corpus. the investment of different investors is created into a pool using which the scheme invests in different securities of the capital market. thereafter, as the value of the invested securities changes the value of your investments also changes. When you redeem the investment you get the value applicable on the date of redemption.

ULIP vs SIP – the similarities

ULIPs and SIPs are often considered to be the same because of the following similarities –

• Both invest in market-oriented securities giving you market-linked returns
• While SIPs mean investing in small amounts at regular intervals, under ULIPs too you can choose to invest regularly in small amounts over the policy tenure
• Both investment avenues pool together the investments from different investors and then invest in different securities based on the asset allocation of the fund
• You can get attractive returns from both the schemes
• Investments into ULIPs and ELSS SIPs both qualify for deduction up to INR 1.5 lakhs under Section 80C
• Switching facility is available under both schemes where you can change the investment funds
• You can also withdraw partially from the funds of both ULIPs and SIPs

ULIPs vs SIP – the concept of NAV

Both ULIPs and SIPs invest your money in chosen funds based on the Net Asset Value (NAV) of the fund. NAV depicts the per unit cost of the fund. It is calculated using the following formula –

NAV = (market value of the portfolio – existing liabilities) / total number of securities held

the money pooled from different investors is invested in different securities having different values. When the aggregate value of the securities purchased are added, it gives the market value of the portfolio. the liabilities are then deducted from the value to arrive at the net value of the portfolio. this value is divided by the number of securities which was bought using the pooled investments. this gives you the Net Asset Value of the fund. As the market value of securities changes every day, NAV also changes and it is dynamic in nature.

ULIPs vs SIP – the differences

Now that you know the similarities, let’s look at the differences between these two investment avenues which completely sets them apart from each other –

ULIPs vs SIPs – Which one should you choose?

Now that you know the differences between ULIPs and SIPs, which one do you think would be better for you?

Both ULIPs and SIPs have their respective pros and cons. To choose the best avenue you should understand your investment requirements and then make a choice. What is ideal for one investor might not be good for another. So, assess your needs and then make a choice.

1. ULIPs would be a good choice if-
   • Your investment horizon is long term
   • You need to fulfil specific financial goals which can be fulfilled with your ULIP portfolio
   • Tax efficiency is extremely important for your financial portfolio
   • You can manage your investment portfolio by actively switching from one fund to another depending on your financial goals and market conditions
   • You need a life insurance cover also

   So, for example, if you want to 

   1. Create a corpus for your child’s future education when your child is just a toddler, ULIP would be an ideal investment avenue
   2. Save taxes on your investments and the corpus that you have created would also be tax-free for your child’s financial needs. 

   Moreover, if you buy a child ULIP, 

   3. in case of your death during the policy tenure, the plan would still continue undisturbed. 
   4. The insurance company would pay the premium till the remaining duration of the policy and promise a maturity benefit after the term is over. 

   This way, you can be ensured that the life cover available under child ULIP would create a good corpus for your child whether you are around or not.

2. On the other hand, SIPs make sense if-
   • You want liquidity in your investment portfolio
   • You want the charges to be the lowest
   • You know your risk appetite and favour one type of investment fund
   • You already have life cover through another insurance plan and you need only investment returns
   • You want a pure investment portfolio, even if you need to pay taxes on the same

For instance, if you want to buy a car in the near future and want to invest for a shorter duration, mutual fund SIPs would be good. You can invest regularly to create a good corpus which would help make the down payment of your car. Moreover, if you like taking risks, you can invest in equity mutual funds for attractive returns.

So, weigh both investment avenues on their respective needs and then choose the one which suits your requirements perfectly.

FAQs

1. What is the term of ULIPs?
   ULIPs are available for terms ranging from 5 years to up to 30 or 35 years. In fact, there is whole life ULIP as well which gives you coverage till 99 or 100 of age.
2. What charges are deducted from SIP investments?
   An entry load might be deducted from the amount that you invest in SIPs.
3. Are SIPs and mutual funds different?
   No, SIPs and mutual funds are the same. SIP is a way of investing in mutual fund schemes wherein, instead of a lump sum investment, you pay periodically.
4. Can ULIPs be bought online?

   Yes, you can buy ULIPs online through Turtlemint. Turtlemint gives you a platform to compare ULIPs of different insurance companies and then buy the best plan as per your coverage needs. You can buy ULIPs through Turtlemint within minutes by filling out an application form and paying the premiums online.