Claim settlement management is the one of the most important service that comes under the crucial quality of life insurance service. The main aim of the study was to analyze the effect of claim settlement practices on the operating efficiency and profitability performance of public sector and select private sector life insurance companies, India. The exploratory research design is applied.The convenient sampling technique is used for selecting the companies from the life insurance industry which constitutes 87.07% share in the industry as per IRDA Annual report 2009-10. The LIC of India is the only one state owned firm in the public sector where as in private sector ICICI Prudential Life, HDFC Life Insurance, SBI Life Insurance and Bajaj Allianz Life Insurance companies were taken as sample. The IRDA annual reports and the selected company annual reports from 2001-02 to 2012-13 were used for collecting the required data. The Operating efficiency of life insurance companies are calculated by using data envelopment analysis tool with the dea online software. The market share, Return on Assets, Claim Settlement Ratio and Claim Rejection Ratio were calculated. These are analyzed by using statistical tools such as linear growth rates, compound annual growth rates, and coefficient of variance, correlation and regression analysis. The analyzed reveals that LIC of India is the industry leader not only in sale of policies but also in the benefit payments. In overall benefit payments among the select private sector life insurance companies, ICICI Prudential was the top performer followed by HDFC Life, Bajaj Allianz and SBI Life insurance. It is concluded that the claim settlement practices of life insurance industry had statistically significant impact on their profitability as well as operating efficiency. More-over, claim settlement practices of select life insurance players had statistically significant positive impact on the profitability but they had statistically significant negative impact on their operating efficiency due to increased operational risk for enhanced sales. Hence companies should follow the appropriate claim settlement practices to achieve the good market share and profitability.
Keywords: Claim settlement, Market share, Operating efficiency, Profitability and IRDA