With claims ratio beating industry standards in FY18, Max Life Insurance’s two-pronged strategy pays off

Max Life Insurance has topped the industry charts with the highest claims paid ratio in terms of the number of policies at 98.26 per cent for 2017-18, official data put out by IRDAI showed.

The private life insurer’s performance on this front is commendable, given that five years back its death claims paid ratio was at 93.26 per cent (2013-14). In 2017-18, Max Life received 10,330 death claims, of which, 178 were repudiated and the rest 10,152 paid by the company.

While achieving this position for FY2018, Max Life Insurance has outperformed insurance behemoth LIC, whose claims paid ratio came in at second rank (98.04 per cent). Its performance is also better than the industry average, which has come down marginally to 97.68 per cent in 2017-18, from 97.74 per cent in 2016-17. The overall private industry average has improved to 95.24 per cent in 2017-18 from 93.72 per cent in the previous year.

Two-pronged strategy

Sharing the ‘secret sauce’ behind Max Life’s feat on claims paid ratio front, V Viswanand, Deputy Managing Director, Max Life, in a conversation with BusinessLine said the company had, over the last five years, adopted a two-pronged strategy, which has now paid rich dividends on enabling industry-beating performance on death claims paid ratio.

The primary strategy has been to strengthen the customer on-boarding process and leveraging technology to strengthen underwriting controls.

“We are now having better claims outcomes because we have, in the last four years, taken steps to weed out fraudulent claims. Four years back, nearly 50 per cent of our repudiations were fraud claims. Today, it is minuscule – just three out of the 178 total claims rejected were fraudulent claims in 2017-18. The rest 175 are medical non-disclosures of terminal illness,” he said.

By asking most of the questions (by leveraging technology) at the customer on-boarding stage (application stage), the life insurer has ensured that it doesn’t deal with fraudulent claims later.

Partners with start-ups

Technology was leveraged by partnering with start-ups, which helped accelerate the learning curve of the life insurer, he said.

When Max Life researched five years back on what led to repudiation of claims, two factors stood out — fraudulent claims and non-disclosure of terminal illness by customers at the time of on-boarding. While Max Life has dealt with the first, it is now on course to tackle the second factor, and is working with start-ups to ensure better outcome on this front, too, according to Viswanand.

“Most frauds happened at the policy-issuance stage. Policies were taken for people who did not exist. Within two months they were declared dead and claim lodged with life insurers. This trend was geography agnostic and happening across the country till we decided to take steps to tackle it,” he said.

To tackle fraudulent claims, it revised its underwriting model every six months to increase the catch rate of high-risk policies. It started maintaining confidential reports on clients at the agent level in select geographies.

Max Life also started using the technology-intensive step of initiating tele-medical examination through start-ups. Instead of a prospective customer going to a doctor for medical check-up before coming on-board, the life insurer started using doctors on a recorded line to do the medical examination-related queries. In select geographies, Max Life Insurance also used video verification process prior to issuing a policy.

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