Claim Settlement Ratio: Understanding its significance and the role it plays

The majority of life insurance customers make their decision to buy a term life insurance plan based on the premium they will be charged. They select the insurer that offers the best value on the coverage. In doing so, do you know sometimes we overlook important aspects of a life insurance policy? While the premium amount is important, another factor to consider is the insurance company’s claim settlement ratio. Annually, the Insurance Regulatory and Development Authority (IRDAI) releases the claim settlement ratios of all life insurance providers on their website. If you are considering buying a term life insurance plan soon, you must evaluate this before selecting an insurer. In this article, we will get to know more about this and the role it plays in your choice of selecting the insurer.
Let us first define what the Claim Settlement Ratio means
The claim settlement ratio is important since it indicates an insurer’s claim resolution history. As a result, while choosing one, examine the claim payment ratios of multiple insurers.
In other words, it shows the number of successfully resolved claims divided by the number of requests received in a given year. For example, if XYZ insurance company receives 100 claim requests per year and successfully resolves 90 of them, its CSR is 90%.
Many experts recommend that when purchasing the policy, choose an insurer with the highest CSR to increase the likelihood that your chosen nominee would get policy benefits (death payout) on time. A higher CSR also means that your family will have the necessary insurance without any hassle.
Significance of the Claim Settlement Ratio
The general rule is that the shorter the CSR range, the greater will be the reliability. Because in the case of a company with a broader range of CSR, one is continually at risk of being found at the lower end of the spectrum. This in turn also reduces the chances of settling the claim.
Look for companies that are consistent in their claim settlement even if it means you have to pass over companies with extremely high CSR in the process. Take into consideration the CSR for the past five years.
How to Compute the Claim Settlement Ratio?
The following formula can compute the claim settlement ratio:
CSR = total number of claims per year multiplied by 100.
For example, if Company-A resolves 8,500 of 10,000 claims between 2022 and 2023, its CSR will be 85% (8,500/10,000 x 100).
Remember that this percentage represents the entire number of health/life insurance claims and all types of insurance that a company provides.
Claims Settlement Process
The following is a detailed claim settlement process:
Reporting the claim: Claims can be submitted online, at branches, the central office, or by calling the helpline number, SMS, or via email. These options allow the policyholder to submit the claim to the insurance company faster and more effectively.
Submission: Once a claim has been reported, you, as the policyholder, should promptly provide all applicable papers. It will ensure that insurers evaluate and approve the same promptly.
Processing: The claim processing should be quick and easy for the policyholder and his family. In recent years, technological advancements have enabled insurers to settle claims more quickly. Sometimes the claim amount is less than Rs 50,000 and is settled within a day.
How to Avoid Having Your Claims Rejected?
Everybody has the misconception that once you get the term life insurance plan, your family will be able to get the death payout with ease. While it is true, it also depends on the nominee- how fast they apply for the death payout and the number of papers they submit on time to ensure they do not face the claim rejection.
Insurance companies may try to find loopholes or inconsistencies in your claims in order to reject them. As a result, if you do not provide them with sufficient evidence to deny your claim, they must compensate you.
The following are some considerations to make when purchasing a term life insurance plan :
Provide accurate information: Always provide accurate and up-to-date information. It could include details about your lifestyle, smoking and drinking habits, medical history, previous insurance policies, employment history, and so on. Although providing accurate medical history information (if you are diagnosed with any disease) may increase premiums, you should be aware that this is one of the criteria used by insurance companies to deny claims.
Fill out the Nomination Form correctly: For the nominee to eventually receive the insurance claim, providing accurate information on the nomination form is critical.
Declare any current or previous insurance policies: Avoid withholding information from your insurer because it could backfire on you.
For example, an insurance company may deny the claim by citing “material information concealment” as the primary reason. Instead, mention any existing insurance policies you have or any term life insurance plan you have had from a different firm.
What one must know
The declared claim settlement ratio is the total of all claims paid by a company for all of its term life insurance plans and products. As a result, you see just an approximated ratio and not the exact percentage for each form of policy—endowment cover, money-back policy, term life insurance plan, child plan, group insurance/single-cover cover, online plan, or offline plan, and so on.
Also, in the claim settlement ratio, you see a percentage figure, not an actual number. For example, if an insurance company rejects 100 claims out of 1,000 claims, the claim settlement ratio will be 90%. The following year, it gets 10,000 claims but rejects around 500. As a result, the corporation’s CSR becomes 95%, yet the company has dismissed further claims.
Conclusion
The claim settlement ratio of an insurance company is an important indicator that provides important information to the buyer in selecting the policy. However, a policyholder should not limit his research to the claim settlement ratio but should also check the coverage offered by different plans from various insurance companies. Finally, after checking all this, one should determine the strategy that best meets his needs.