Claim Settlement Ratio: Everything You Need To Know

Whenever you order food from Zomato, Swiggy, etc., you pick the restaurants based on their ratings. In your opinion, a restaurant with a high rating must be serving quality and delicious food. Restaurants, therefore, consider their stellar ratings as a badge of honour that proves their calibre - which in turn drives business.

Similarly, insurance companies display and flaunt their high claim settlement ratios on their websites. By looking at this ratio, you can learn about the insurer’s reliability in terms of paying out the claims - and provide a perspective of possibility of whether an insurance company will settle your or your family claim.

While there are countless insurance companies claiming to be the best in the market, you can use this indicator to gauge their worth - and make an informed decision. But, what exactly is this claim settlement ratio? How is it calculated? Why is it so crucial to look at the Claim Settlement Ratio (CSR) of an insurance company?

Let's see!

What Is A Claim Settlement Ratio?

It is the percentage of claims the insurer has settled in a given financial year. In other words, it is the proportion of claims paid out by an insurance company during a fiscal year.

Why Is A Claim Settlement Ratio Important?

When you buy a life insurance plan, you may have doubts about whether the insurance company will in fact settle your claim. However, if a company has a high CSR, it shows that a greater number of claims are being settled by the insurance company and it is highly likely that in the event of your claim, it would be settled.
It's also crucial to check the insurer’s CSR record over the past five years. As consistency is the key, a company that consistently maintains a good CSR is said to be the most credible one. Generally, the higher the CSR, the better the insurer. ABSLI has a CSR of 98.12% - as per Financial Year 2022-23 and the statistics explains everything.

Now that we know its importance, let's look at the benefits.

How Is Claim Settlement Ratio Calculated?

A claim settlement ratio is calculated as the number of claims settled by the insurer divided by the number of claims received in a particular financial year.

Claim Settlement Ratio = Number of claims settled/Number of claims received X 100

Example: Say a life insurance company receives 100 claims during a financial year.

• Out of those, say it accepts 96 claims and pays the claim amount to the respective nominees who have raised the claims.

• And, rejects the remaining 4 claims.

In this case, the claim settlement ratio = (96 ÷ 100) x 100 = 96%

Hence, the life insurance company has a claim settlement ratio of 96%.

Where Can You Find The Claim Settlement Ratio For Different Insurance Companies?

The Insurance Regulatory and Development Authority of India (IRDAI) website provides information about the claim settlement ratios of all insurers in India. You can examine the list and compare the CSRs of various insurers - and choose the one that’s right for you. Further, individual insurance companies also provide the claim settlement ratio on their website and is also part of the Insurer's Annual Report.

Benefits Of Choosing An Insurer With A High CSR

When it comes to buying life insurance, you need to consider many factors before settling on an insurance company. CSR is one of them. Here's why -

To Know The Reliability Of The Insurer

A life insurance policy is a long-term commitment. To take advantage of the policy's benefits, you must pay a significant amount of premiums over a long period of time. In the event if your claim is rejected in the future due to some reason, it can seriously harm your financial planning - something that you don't want to happen.

The CSR gives you an idea of the insurance company's reliability by telling you how many claims have been settled and how many have been rejected. Hence, insurers with favourable CSRs are considered credible as there are fewer chances of claim rejection.

Hassles-Free Claims Experience

A life insurance policy is intended to provide financial security for your family. And in case of your untimely demise, the last thing you would want your loved ones to endure is having a claim rejected by your insurance company. So, it is your responsibility to prevent your family from experiencing this hardship. To make the right policy purchase decision, you must pay attention to the claim settlement ratio. A high CSR will ensure your family’s claim in most probabilities settled quickly - without many hassles. The entire claims process, from claim submission to disbursement, will be straightforward, convenient, and transparent.

In short, a high CSR means the insurer has a favourable claim settlement record, and should there be a claim, the whole process will run smoothly for your family without a hitch.

Simple Claims Process

The insurance company's impressive history of successfully resolving numerous claims demonstrates their efficient and hassle-free procedure. This means that if the need arises, your family can navigate the claims process smoothly, without any unnecessary complications.

Quick Claim Process

Time is crucial, especially when it comes to life insurance claims. Insurers with a high CSR are known for their speedy claim settlement process. This means that your family will receive the necessary financial support without any unnecessary delays. A fast and efficient claims process can greatly ease the emotional and financial strain on your loved ones during difficult times.

A key factor in assessing an insurer's trustworthiness is their ability to process claims quickly and effectively. A high Claims Settlement Ratio (CSR) is a clear indication of their strong capability to pay out claims. Insurers with a positive track record in CSR have proven their dedication to fulfilling their financial responsibilities. This aspect is especially comforting for customers, as it fosters confidence in the insurer's robust financial stability and operational efficiency. This assurance signals that the company is well-equipped to fulfill its claim obligation seamlessly, without unnecessary complications.

To Sum It Up!

Life insurance is a long-term investment. The primary reason behind purchasing this policy is to protect your family's financial future, so you certainly don't want the claim to be denied for any reason. To avoid this, you should compare and purchase it from an insurer with a higher claim settlement ratio. A good CSR indicates that the insurer is trustworthy and ensures that your family won't have to move from pillar to post at the time of a claim.