Everything About The Claim Settlement Ratio

  • Life Insurance Articles

When you’re looking for the right life insurance plan to purchase, you need to consider several factors. The amount of life cover, the tenure of coverage, the riders, if any, and the premium payment term are all important factors. In addition to this, the claim settlement ratio of insurance companies is another crucial element you need to weigh in on.

Wondering what the claim ratio is all about? Get to know the details here.

What is the claim settlement ratio?

The claim settlement ratio is the percentage of claims that an insurer has settled. In other words, it is the proportion of claims that an insurer has paid out during the financial year concerned. The ratio shows you a comparison between the claims filed and the claims settled.

How is the claim settlement ratio calculated?

The formula for the claim ratio is simple. Check it out here.

  Claim Settlement Ratio = (Total no. of claims settled ÷ Total no. of claims received) x 100

So, say a life insurance company receives 1,00,000 claims during one financial year.

● Of those, say it accepts 97,200 claims and pays the sum assured under those policies to the nominees who have raised the claims.

● It rejects 2,800 claims.

Then, the claim settlement ratio would be (97,200 ÷ 1,00,000) x 100 = 97.2%

What does the claim settlement ratio of insurance companies tell you?

The claim settlement ratio tells you how likely it is that your claim (or your nominee’s) will be settled by the insurer. The higher the claim ratio is, the better it is for you. This is because a high claim settlement ratio implies that the insurer settles a vast majority of the claims they receive.

However, there’s one important to keep in mind. The claim settlement ratio of insurance companies is not just an aggregate of the claims paid out for life insurance policies. It encompasases claims paid out for all forms of insurance offered by an insurer

Why is the claim settlement ratio important?

Life insurance aims to ensure that in case of the unexpected demise of the policyholder, their family has a financial safety net to rely on to meet their daily needs and fulfill their life goals. So, when you are shopping for a life insurance policy, it’s important to choose an insurer who will pay the claims to your nominees in case the insured event happens.

Where can I find the claim settlement ratio for different insurance companies?

You can find the claim settlement ratio on the insurer’s website itself, in most cases. Alternatively, you can visit the insurance regulator IRDAI’s website and download their annual report for the latest financial year. The report contains the details of the percentage of claims settled by the insurers in the country.

How do you know what a good claim settlement ratio is?

Now that you know the basics of the claim ratio, you’re perhaps wondering what the best claim settlement ratio is. Ideally, a claim ratio of 100% would be perfect. But for several reasons like incorrect claim applications or claims raised on deaths not covered by the plan, insurance companies will have no choice but to reject the claims.

So, the thumb rule is, the higher the CSR, the better. More specifically, any claim settlement ratio over 95% is a good score. Curious to know what our claim settlement ratio is? In FY 2019-20, we settled 97.54% of claims, with an average turn-around time of just 2.4 days!

Conclusion

So, now you know what the claim settlement ratio is, and why it’s so important, right? Make sure you do your research and choose an insurer with a good track record. And if you’re looking for some insights into insurance jargon, so you can be a more informed buyer, here are some important terms you should know. Check them out before you go shopping for insurance online or offline.

ADV/3/20-21/2489

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