Branch performance review: settlement ratio, agent productivity and next-year projection
At the annual review of a zonal branch, the following audited figures for 2024-25 are placed before the assistant: 160 active agents; 4,800 new policies; first-year premium ₹6,72,00,000; renewal premium ₹21,60,00,000; 320 death and maturity claims received, of which 305 were settled and 15 are pending. The zonal manager wants three things before the meeting: the settlement ratio, the gap to a 97.5% target, and a projection for next year assuming new policies rise 15% and the average first-year premium per policy rises 5%. She also wants the average premium collected per agent, because the benchmark is ₹18,00,000 and she suspects the branch is short. The branch note reports most figures in crore and lakh, so the assistant must convert carefully before answering.
1. Compute the claim settlement ratio and the number of additional claims that must be settled to reach the 97.5% target.
Read the worked answer
Ratio: settlement ratio = claims settled ÷ claims received (not ÷ pending) = 305 ÷ 320.
305 ÷ 320 = 0.953125 = 95.3125%, i.e. about 95.31%.
Gap to target: 97.5% of claims received = 0.975 × 320 = 312 claims.
Additional settlements needed = 312 − 305 = 7 claims.
Sanity check: exactly 5% of 320 is 16, so 15 pending is 4.6875% - just inside the tolerance. Settling 7 of the 15 pending claims lifts the ratio to 312/320 = 97.5%. If the branch settles none of them, it finishes at 95.31% and misses the target.
Presentation warning for the meeting: do not compute the ratio as 305/320 and then describe 15 as '5% of claims' rounded up, and do not divide by 305. State the denominator used - claims received during the year - because a ratio computed on claims disposed can flatter or distort the figure when the pending backlog changes between years.
2. Compute the average first-year premium per policy and the average total premium per agent, and assess both against the branch benchmarks.
Read the worked answer
Average first-year premium per policy: ₹6,72,00,000 ÷ 4,800.
6,72,00,000 ÷ 4,800 = 672,00,000 ÷ 4,800 = ₹14,000 per policy.
Total premium collected: ₹6,72,00,000 + ₹21,60,00,000 = ₹28,32,00,000 (₹28.32 crore).
Average premium per agent: ₹28,32,00,000 ÷ 160 = ₹17,70,000 per agent.
Assessment: the branch is ₹30,000 per agent short of the ₹18,00,000 benchmark - about 1.67% below, so it is close but not compliant. To reach ₹18,00,000 × 160 = ₹28,80,00,000, the branch needs ₹48,00,000 more premium, which at ₹14,000 per policy means about 343 extra policies.
Caution on interpretation: the per-agent figure mixes first-year and renewal premium. An agent who has just joined carries little renewal premium and will look poor even with good new business. Pair this metric with new policies per agent (4,800 ÷ 160 = 30 policies per agent) before drawing a conclusion about individual performance.
3. Project next year's first-year premium and total premium, then state which of these are supported by the 2024-25 data: (a) more than 95% of claims were settled, (b) fewer than 5% of claims remained pending, (c) average premium per agent exceeded ₹18,00,000.
Read the worked answer
Projection - first-year premium:
- New policies: 4,800 × 1.15 = 5,520.
- Average premium: 14,000 × 1.05 = ₹14,700.
- First-year premium: 5,520 × 14,700 = 5,520 × 14,000 + 5,520 × 700 = 7,72,80,000 + 38,64,000 = ₹8,11,44,000 (₹8.1144 crore).
Renewal premium: the question gives no growth rate for renewals, so it must not be invented; on unchanged renewal premium, total = ₹8,11,44,000 + ₹21,60,00,000 = ₹29,71,44,000. If the manager supplies a renewal growth rate, apply it to ₹21,60,00,000 and add.
Statement check:
- (a) Supported. 305/320 = 95.31%, which is more than 95%.
- (b) Supported. 15/320 = 4.69%, which is fewer than 5%.
- (c) Not supported. ₹17,70,000 per agent is below ₹18,00,000.
Reasoning note: (a) and (b) are not two views of one fact - they have different denominators of comparison, 305 settled versus 15 pending. Answer each separately rather than assuming that 'more than 95% settled' automatically makes 'less than 5% pending' false.