Claim Settlement Ratio of Life Insurers

Claim Settlement Ratio of Life Insurance Companies in India - BimaBandhu
Knowing about an insurer’s claim settlement ratio is crucial for every life insurance policy buyer. Read the complete guide here.

Buying life insurance is a significant decision in life as it involves a lot of planning for the future. While buying a suitable life insurance policy, you look at several different parameters, such as its features, benefits, premium, and suitability for your needs. The ultimate need that life insurance purchase fulfills is that it provides financial security in case something happens unexpectedly to the life insured individual. In your case, you want your family members to get the expected insurance claim without any hassle in your absence. To be sure that this will happen just the way you expect, knowing about the insurer’s claim settlement ratio is crucial.  

Before you buy any life insurance policy, let us throw some light on the definition of claim settlement ratio. 

What is Claim Settlement Ratio? 

The claim settlement ratio, also known as CSR or claims paid ratio of a life insurance company refers to the number of claims settled by the company against the total claims received in a specific financial year. In simpler words, you want to be sure that the chosen insurer will settle the claim in case of an untoward incident. Otherwise, there is no point in buying a life insurance policy at all. The claim settlement ratio is the number that assures you of reasonable payouts at the time of claim settlement. In general, the higher the claims paid ratio of a life insurer is, the better it is for the policyholder. 

Consider the following example to understand the claim settlement ratio better – 

A life insurance company receives 1000 claim applications in a year, out of which it successfully settles 970 applications. In this case, the claims paid ratio of the company becomes 97%, which is a good figure. The remaining percentage of claims represents the cases in which the claim gets rejected because of red flags in the policy draft which go against the policy inclusions.  

A claim settlement ratio is a key indicator that reflects on the claim resolution pattern of different life insurance companies. This is the reason why the Insurance Regulatory & Development Authority (IRDAI) releases an annual report of claim settlement ratios of different insurers. You can check these reports for different years online. 

Also Read: What are the Types of Term Insurance Plans in India?

What Does Claim Settlement Ratio Tell You? 

Claim settlement ratio acts as a reliable metric for you to determine if a specific life insurance policy and the insurance company is the right choice for you. When you check the claims paid ratio of the insurer before buying a life insurance policy, you can rest assured that: 

  • Your policy nominee will get timely disbursal of the policy benefits in case of an unfortunate mishap. 
  • The entire experience of filing a life insurance claim to the final amount disbursal will be convenient and transparent for your loved ones.  

Think of this ratio as reflective of the commitment of a life insurance company towards its policyholders.  Ideally, it is advisable to compare the claim settlement ratio of different life insurance companies and then decide on buying a policy for protection or fulfilment of life goals.  

Lesser-Known Fact About Claim Settlement Ratio 

The claim settlement ratios that different life insurers present every year represent the total of all claims that they receive for all the life insurance products they offer. In clear terms, the claims paid ratio of an insurer talks about an overall estimate, and not specific to each type of policy they offer, be it term plan, money back policy, retirement plans, to name a few.  

Hence, you should not only look for the numerical value of a company’s claim settlement ratio but many other related factors that determine its suitability for you.  

Why is Knowing About Claim Settlement Ratio Important? 

The importance of any life insurance policy is related to the assurance that the policy nominee you select will receive the insurance payouts in case of an unfortunate life event as covered under the policy. With the amount received, your family can fulfill their financial needs after you.  

However, certain circumstances lead to the rejection of claims. This can be because of the wrong information provided by the insured while buying the policy. At last, the life insurance plans can only be as reliable as the insurer that offers them.  

Knowledge about claim settlement ratio can help you make an accurate judgement of the competence and reliability of a potential life insurance company. A higher claim settlement ratio is also indicative of the high satisfaction of the policyholders and a strong underwriting procedure.  

How is Claim Settlement Ratio Calculated? 

Claim settlement ratio is calculated using the following formula: 

Claim Paid Ratio = (Total number of claims paid during a financial year) / (Total claims received) x 100 

Why Does Consistency/Growth of Claim Settlement Ratio Matter? 

Along with the claim settlement ratio itself, it is the consistency of this ratio over consecutive years that matters a lot for a policy buyer. The reason why checking this consistency is important is that you want to be assured of the benefits that you or your loved ones will receive as per the chosen policy. If a company’s claim settlement ratio shows an increasing trend over the last few years, it shows it is working on ensuring maximum benefits to the policyholders year on year. 

As a thumb rule, you should check the claim settlement ratio of insurers for the last five years before buying any policy.  

You May Also Like to Read: Life Insurance Policy – Complete Guide

Top Life Insurance Companies in India as per Claim Settlement Ratio 

As per the latest annual report issued by IRDAI, the following life insurance companies tops the chart as their claim settlement ratio: 

Life Insurance Company 

Claim Settlement Ratio 

Max Life  

99.22% 

HDFC 

99.07% 
Tata AIA 

99.06% 

Pramerica Life 

98.42% 

Exide Life 

98.15% 

Canara HSBC OBC 

98.12% 

Reliance Nippon 

98.12% 
Bajaj Allianz 

98.02% 

Aegon 

98.01% 

ICICI Prudential 

97.84% 

Source: IRDAI Annual Report 2019-2020 

1. What do you mean by a good claim settlement ratio? 

A good or high claim settlement ratio means that the chances of getting the life insurance claim accepted are high. It is a parameter you should look at to be sure that the chosen insurer is secure and reputable. 

2. Why should you check the claims paid ratio? 

Since buying a life insurance policy is a long-term decision, you need assurance that the policy documentation is well-rounded and there would be no hassle in getting the claim settled whenever needed. Along with comparing life insurance policies in terms of their benefits, you should also compare insurers with respect to their latest claim settlement ratios.  

3. What does the claim settlement ratio of a life insurance company signify? 

It tells you about the company’s reputation in the market, trustworthiness amongst the current and prospective policyholders, ease of claim settlement, and support services.  

4. How to check the claim settlement ratio of top life insurance companies in India? 

You can visit the official website of each of the insurers to check their claim settlement ratio if listed. Otherwise, you can check it in the IRDAI annual report available online. 

5. Which life insurance company is best at paying claims? 

You cannot know this with certainty. However, you can get a fair idea about an insurer’s commitment towards settling claims by digging deeper into their products’ features and claim settlement ratio.  

Related FAQs: Most Common Life Insurance FAQs

Read BimaBandhu’s Insurance Guides

 

1 Shares:
You May Also Like