Articles 248 views March 5, 2020

Why You Must Need to Know the Claim Settlement Ratio of Life Insurers Before Buying a Policy?

Every insurance is an unassuming proposal. The belief is that you will pay premiums to ensure that in case of an unexpected incident, the insurer is likely to compensate you or your family. Though expectations are occasionally contradicted and claims are not being paid, resultant in customer disappointment and a great amount of disbelief towards the insurers. Good insurance companies pay a bigger proportion of claims and also pay them fast since they have effective and advanced procedures before onboarding you and after selling the policy to you. Hence, all these insurance establishments have a very good number of satisfied customers and are generally follows diligently all the regulations laid by IRDA as compared to the companies having a low claim settlement ratio. This is the cause why you must consider the factor of claim settlement ratio when you are selecting an insurance company.

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What is Claim Settlement Ratio?

Claim Settlement Ratio or commonly known as CSR is a ratio or percentage of the number of claims paid to the clienteles by the insurer about the entire claims acknowledged by the company. Therefore, the formula used to arrive at the Claim Settlement Ratio will be as below:

Claim Settlement Ratio = Entire claims acknowledged and compensated / Total number of claims received by the insurer*100

What is the significance of the Claim Settlement Ratio to you, as a customer?

The fundamental objective of having an insurance policy is to give complete financial protection to your dependents in your absence. Therefore, Claim Settlement Ratio plays a vital role when you are picking an insurer. From a potential policyholder’s viewpoint, the higher the Claim Settlement Ratio is, the more trustworthy the insurer is. Let us take a simple example of two insurance companies Company A with a Claim Settlement Ratio is 60% and Company B with a Claim Settlement Ratio of 90%. This essentially means that Company A has been able to settle or pay 60 death claims out of 100 claims which they have received. On the contrary, Company B was able to settle 90 claims successfully out of 100 claims. Thus, you can consider that Company B is much better than Company A in terms of reliability, trustworthiness and competent expertise and can rely on this company and move ahead.

Best term insurance companies will not only safeguard the transparency factor that their customers are completely mindful of what he or she is buying but also follow a strong underwriting procedure of managing the risk. In effect, the more well-organized the process of underwriting is, the healthier will be the customer satisfaction and claims settlement ratio of the insurance company. Higher Claim Settlement Ratio brings in the confidence in any customer to that the insurers will be able to provide financial security thereby keeping the commitment.

The Recent Data

IRDA- Insurance Regulatory and Development Authority of India, issues the Claim Settlement Ratio for life Insurance companies every year and the same is effective till the end of the next year. The table below will show the recent data of Claim Settlement Ratio for the top 10 life insurance companies for the fiscal year 2018-2019.

Serial No.Name of the CompanyClaim Settlement Ratio (%)
1.TATA AIA99.07
2.HDFC Life Insurance Plans99.04
3.Max Life Insurance98.74
4.ICICI Prudential Life Insurance 98.58
5.LIC 97.79
6. Reliance Nippon97.71
7.Kotak Life Insurance 97.4
8.Bharti AXA Life Insurance97.28
9.Aditya Birla Sun Life Term Plan97.15
10.Exide Life Term Plan97.03

Furthermore, we can see that the Claim Settlement Scorecard table as below where the industry-standard concerning the number of benefits paid has risen from 93.07 in the financial year 2017-2018 to 94.26% for the financial year 2018-2019. Thus far, it remains to be lower in comparison to the claim ration that is being paid by the policy count. This difference is mainly due to the denial of some early claims of large amounts and the main causes of such rejection are frauds and not disclosing the facts. Hence, it is the responsibility of the insurer to inspect doubtful early claims, predominantly when the sum assured is on a higher side, to safeguard the benefits of all the stakeholders and the honest policyholders. The private sectors show considerable improvement in the amount of benefit paid from 89.44 % for 2017-2018 to 91.32% in 2018-2019 and also the number of policies, whereas LIC’s number of policies has reduced from 98.04% to 97.79%.

 2017-2018 2018-2019 
Quantity of PoliciesAmount of BenefitQuantity of Policies NumberAmount of Benefit
Private Insurers95.24%89.44%96.64%91.32%
LIC98.04%94.45% 97.79%95.32%
Industry Total97.68%93.07%97.64%94.26%

Conclusion

Always consider Claim Settlement Ratio, as one of the primary factors in deciding your insurance company and safeguard the interest of your family members future financial requirements.

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