Insurance industry breaks six-year jinx

CHENNAI: The insurance industry seems to have broken its six-year jinx of declining insurance sales. Life insurance penetration in India has seen a steady decline after the sector reported 4.60% reach in 2009. This year's figure, however, showed a slight improvement by 12 basis points to 2.72% compared to the year-ago, said the Insurance Regulatory and Development Authority of India (IRDAI) in its 2015-16 annual report.
India’s share in the global life insurance market also increased to 2.24% during 2015-16 versus 2.08% in 2014-15. India was ranked 10th among 88 countries worldwide for life insurance business.
With the turmoil in the equity markets and low interest rate environment both public and private insurers saw lower returns on their market investments. LIC's investment income dipped 6% in 2015-16 to Rs 1.57 lakh crore in 2015-16. In the case of private insurers' investment income shrunk 83% to Rs 13,078.73 crore. IRDAI noted that while the industry remains well capitalized overall, still low interest rates and sluggishness have resulted in reduced yields.
When it came to claims' settlement ratio, LIC was ahead of private life insurers. LIC settled 98.33% of claims versus private insurers settling 91.48% of claims.
"There has been an improvement year-over-year. LIC's settlement ratio improved 14 basis points, while that of private insurers improved 208 basis points. Insurers also rejected less number of claims year-over-year. LIC's reputed 0.98% claims versus 1.15% in 2014-15," said IRDAI.
Private insurers continued to reject a sizeable number of claims - though there was some improvement year-over-year. In 2015-16, private life players' percentage of repudiations came down to 6.67% versus 7.78% the previous year.
In the group death claims, IRDAI pulled up private insurer Future Generali Life Insurance Co. Of the industry's 12,900 pending claims, 96% were due to Future Generali. "Of 12,414 pending claims, 12,371 are under litigation and are subjudice," said IRDAI. Barring Future Generali, the industry's settlement ratios had improved, said the regulator.
When it came to the general insurance industry, participation in government sponsored schemes such as the Rashtriya Swasthya Bima Yojna scheme took its toll. Insurers had to pay out more in claims for group and government schemes pushing their claims ratios as high as 120% and 109% respectively. This compares to a claims ratio of 77% in individual business. High claims ratio are a burden for insurance companies as it means they are paying more in claims than they collect as premium.
For the industry, net incurred claims increased 17% to Rs 64,495 crore in 2015-16.8. Health and motor portfolios continued to bleed with 98.43% and 81.18% respectively.