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Insurance

What is Claim Settlement Ratio and Why is it Important?

  • Written by Vanshika Singh


The main objective of the term insurance plan is to make sure that your family gets the required financial support after your death. It is important to keep in mind that, it should not be the case that the insurance company rejects the death claim made by the beneficiary of the policy. Thus, it is important to keep a track of which insurance company maintains a good report in settling the death claim. The Insurance Regulatory and Development Authority of India (IRDAI) publishes the ‘Claim Settlement Ratio” in its annual report every year.

Read further to know in detail what is claim settlement ratio and why is it important.


What is Claim Settlement Ratio?

The claim settlement ratio shows the percentage of claims the insurance company has paid in a financial year. In simple terms, the claim settlement ratio can be described as % of claims settled by the insurer in comparison to the total number of claims received in a year.

For example, if an insurance company has a claim settlement ratio of 90%, it means that the company has settled 90 death claims out of every 100 insurance claims received. This means that the rest 10% of the filed claims are rejected by the insurance company.

For insurance buyers, it is always advised to purchase the term insurance plan from insurance companies, which has a high claim settlement ratio. The higher the CSR of the company is the more reliable the insurance company is, as it reflects the insurer’s commitment towards its customers.

Moreover, the claim settlement ratio of the insurance company also helps to understand the overall risk management ability of the company. It shows how efficiently the insurance company implements the process and technology to pick out the applications which are not genuine.


Formula to Calculate Claim Settlement Ratio

Claim Settlement Ratio=(Number of claim settled/number of claims received) X 100

Usually, a higher death claim settlement ratio means that the possibility of settlement of claim by the insurer is higher.

Claim Settlement Ratio of Life Insurance Companies for the Year 2018-19

Let’s take a look at the claim settlement ratio of different life insurance providers in India for the year 2018-19.

S. No.

Life Insurance Companies in India

Claim Settlement Ratio

1

Aditya Birla Sun Life Insurance Company

97.15%

2

AEGON Life Insurance Company

96.45%

3

Aviva Life Insurance Company

96.06%

4

Bajaj Allianz Life Insurance Company

95.01%

5

Bharti AXA Life Insurance Company

97.28%

6

Canara HSBC OBC Life Insurance Company

94.04%

7

Edelweiss Tokio Life Insurance Company

95.82%

8

Exide Life Insurance Company

97.03%

9

Future Generali Life Insurance Company

95.16%

10

HDFC Life Insurance Company

99.04%

11

ICICI Prudential Life Insurance Company   

98.58%

12

IDBI Federal Life Insurance Company

95.79%

13

IndiaFirst Life Insurance Company

92.82%

14

Kotak Life Insurance Company

97.40%

15

Life Insurance Corporation of India Company

97.79%

16

Max Life Insurance Company

98.74%

17

PNB MetLife Insurance Company

96.21%

18

Pramerica Life Insurance Company

96.80%

19

Reliance Life Insurance Company

97.71%

20

Sahara Life Insurance Company

90.16%

21

SBI Life Insurance Company

95.03%

22

Shriram Life Insurance Company

85.30%

23

Star Union Dai-ichi Life Insurance Company

96.74%

24

Tata AIA Life Insurance Company

99.07%


Reasons Why Policy Death Claim Gets Rejected

While zeroing in on a term insurance plan from any insurer, it is crucial to understand the claim process of the company, so that if any eventuality happens, the nominee receives the claim hassle-free. One of the best ways to ensure that the claim filed does not get rejected is to know the reasons why claims get rejected.


Incorrect or Missing Information

While filling the application form, make sure that you double-check the details you fill in the form. This is because, at the time of claim processing, the insurance companies review the application form and verifies the information provided by you while filing a claim. If the insurer finds any information missing or faulty or misleading, the claim might get rejected completely.


Careless Attitude for Term Insurance Plan

It is significant that you do proper research before purchasing a term insurance plan. Make sure that you compare various plans online and go through the cost and features of different plans. If you purchase a term insurance plan without proper research then you may end up buying a policy from a non-reputated insurer.


Hiding Medical History

One of the key factors of disclosing the information is to provide the right medical history. Make sure that you share every information related to the health in detail with the insurer like the habit of alcohol intake or smoking, any previous illness, etc. In case you fail to do so, the insurance company will not entertain any claim based on the reason undisclosed medical information.


Policy Lapse

The most common threat to the settlement of the claim is a policy lapse. Most insurance company offers a grace period of 30 days to clear the due premium. However, the claim filed will not be processed if the plan is not renewed with the grace period.


The Bottom Line!

In this day and age, having a term insurance plan is a must for every individual. However, before making an informed decision make sure that you check the claim settlement ratio of the company and go for reputed insurers so that you can ensure financial security to your loved ones even in your absence.

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