Claim Settlement Ratio of Life Insurers
Claim settlement ratio is a good metric to shortlist the right insurers. The IRDAI (Insurance Regulatory and Development Authority of India) in its annual report publishes these metrics for all insurers. Claim settlement ratio can be understood easily by understanding how insurance companies follow certain rules and regulations before settling an insurance claim, in case a policyholder passes away during the policy tenure.
What is Claim Settlement Ratio?
The claim settlement ratio is the proportion of the number of claims paid by the insurance company against the number of claims received during the financial year. Claim settlement ratio (CSR) is the % of claims that an insurance provider settles in a year out of the total claims. It acts as an indicator of their credibility. As a general rule, the higher the ratio, the more reliable the insurer is.
Claim Settlement Ratio can serve as a reliable metric to determine if a certain policy and insurer is the right choice for you or not. The claim settlement ratio is calculated by dividing the number of insurance claims settled by the number of insurance claims received by the insurance company. Ideally, you should go for an insurer with a high claim settlement percentage or CSR.
When buying a life insurance policy, the claim settlement ratio is an important factor to consider. The claim settlement ratio is a measure to meter the percentage of life insurance claims an insurer has settled during a financial year against the number of claims it receives in the period including pending claims from last year.
What is Life Insurance Claim Settlement?
Life insurance claim settlement is the procedure of the applicant/beneficiary filing a claim to the insurance provider to avail the death benefits under the life insurance policy of the life assured in case of an untimely demise of the life assured during the policy tenure.
Life Insurance is an agreement between the policyholder (insured) and the insurance company (insurer), where the insurer agrees to pay the sum assured of the policy when the insured dies as per the conditions mentioned in the policy document.
The sum assured of the policy is also called death benefits. The insured pays periodic premiums to keep the policy active. The insured will nominate a beneficiary to receive the proceeds of the life insurance policy.
The process of life insurance claim settlement is followed by most insurance companies. However, every insurance operates differently hence the claim settlement process for a life insurance claim can differ from insurer to insurer:
- Claim Intimation
- Submission of documents
- Claim Evaluation and Settlement.
Claim Settlement Ratio in Term Insurance:
- While filing a term insurance claim, the settlement amount provided by the insurance company is the maximum benefit that a nominee or the family can expect after the policyholder’s demise.
- If you have chosen an insurance company with a superior claim settlement ratio or CSR, you can easily expect the company to provide you or your family with the benefits assured under the policy.
- This, in turn, will help in ensuring that you or your loved ones won’t get affected by the uncertainty of life as well as the increasing cost of living. However, keep in mind that to ensure quick, hassle-free claim settlement, you will have to choose an insurance company with a high claim settlement ratio.
Why Claim Settlement Ratio is Important?
Claim settlement ratio is a key factor to consider as it reflects the pattern of resolution of claims by an insurance company. Buying a life insurance policy is a long-term aim. Not only do you have to pay a significant amount of premiums over specific payment tenure to avail the policy benefits, but you also have to be sure that your insurance policy documentation is well-rounded so that it doesn’t get rejected.
Thus, you need to compare and purchase a life insurance plan from an insurer with a high claim settlement ratio. Claims Settlement Ratio is a reliable measure that can help you determine if a certain insurance company is trustworthy or not and that your family will not have to move from pillar to post in getting the insurance benefit, after your untimely demise.
- Financial Security: The entire objective of buying life insurance is ensuring financial protection against unforeseen circumstances. However, the purpose will be defeated if the insurer does not honor your claim. On the other hand, if the insurer honors most of the claims, your family is more likely to have a simple, transparent, and hassle-free claim process. You can, thus, rest assured that your loved ones don’t have to go through a tough time getting the sum assured.
- Reliability: The claim settlement ratio indicates their ability to pay the sum assured to you or your nominee. If your provider has been maintaining a consistently high CSR over a considerable amount of time, they are unlikely to default on their compensation committees.
Claim Settlement Ratio for 2019-20:
The Insurance Regulatory and Development Authority of India (IRDAI), in its latest annual report, has given details of claim settlements of all life insurance companies for the year 2019-20. Max Life Insurance has the highest claim settlement ratio in terms of the number of claims with 99.22%. This is followed by HDFC Life Insurance and Tata AIA Life Insurance with 99.07% and 99.06%, respectively. Out of the top 10 life insurers, nine have a claim settlement ratio of more than 98%.
The table below presents the claim settlement data for individual & Group death claims for the year 2019-20 in order of highest claim settlement ratio.
||Claim Settlement Ratio (2019-20)
||Individual Claims Ratio
||Group Claims Ratio
|Aditya Birla Sunlife
|Star Union Dai-ichi
Types of Life Insurance Claims:
- Maturity Claims: when the policy tenure ends and the policyholder survives the whole policy tenure a certain amount is paid to the policyholder itself. Maturity claims are only paid when the policy term ends and the premiums are paid on time. The policyholder is required to fill a duly signed discharge form to avail maturity claim.
- Death Claims: In death claims, the applicant can make a request for death benefits upon the death of the policyholder and the sum assured amount is settled towards the beneficiary upon the death of the policyholder in any case. The sum assured is paid to the beneficiary only after the death of the policyholder is intimated to the insurance company. The death intimation includes policy number, date of death, cause of death, and the policy term upon which the company investigates the death claim.
Documents Required for Life Insurance Claims:
- Original Policy Documents
- Claimant’s Photo ID Proof
- Claimant’s Address Proof
- Claim Forms (Duly signed and attested)
- Death Certificate attested by the local authorities
- Copy of Cancelled Cheque/Bank Statement/Bank Passbook
- Copy of FIR/Post Mortem Reports/Punchnama
- Medical Records (including hospital discharge summary).
How is Claim Settlement Ratio Calculated?
The claim settlement ratio is calculated by dividing the total number of insurance claims settled by the total number of insurance death claims received during the year by the insurer. A CSR is calculated with the following formula:
“Claim Settlement Ratio (CSR) = (Total number of claims paid in a year ÷ Total number of claims received in a year) x 100.”
The major aspects to note about CSR in India are as follows:
- The ratio is calculated as the total claims approved
- CSR is calculated and not just measured for a single product. You will find CSR for all insurance products by all insurance companies.
- The claim settlement ratio should be consistent. While buying term insurance, one must always check the settlement ratio for the last five years of the company. If consistency in CSR is found, the insurance company can be relied on to settle term insurance claims.
- If interested, you can also check the number of claims received by a specific insurance company you are interested in buying term insurance from.
What is a Good Claim Settlement Ratio?
Insurers with more than a 97% claim settlement ratio are likely to offer a better claims experience to policyholders.
- Overall, the higher the percentage of the settled claims, the better are the chances that your life insurance policy claim will be accepted and settled by the insurance company.
- Another reflection of a high CSR is on the insurance company’s finances.
- With settlement percentages up and above the 95% mark, a prospective life insurance buyer can be sure that the insurers are secure as they are willing to pay the insurance claim amount to most of their customers.
Which Life Insurance Company has the Lowest Claim Settlement Ratio?
Edelweiss Tokio Life Insurance Co. Ltd has the lowest claim settlement ratio of 83.44% in FY 2019-20. The claim settlement ratio is the ratio of the number of claims settled to the number of claims made. Claims may be rejected by life insurance companies for various reasons such as misrepresentation of facts, fraud, impersonation (acting), etc. It is hence important to ensure that you provide accurate information to the insurer at the time of purchase.
Which Life Insurance Company has the Highest Claim Settlement Ratio?
Max Life Insurance Co. Ltd has the highest claim settlement ratio of 99.22% in FY 2019-20. A consistently high claims settlement ratio is a good parameter to understand how well the underwriting and claims process of a company is managed.
Importance of Selecting a High Claim Settlement Ratio Company:
Here are a few significant reasons for you to choose an insurance company with a high claim settlement ratio or CSR:
- It helps in understanding how an insurance company handles the claims received from the policy nominees.
- It helps in gauging the credibility of the insurance company and reaching a decision.
- It helps in building confidence among the policy buyers during policy purchase due to the fact that a high claim settlement ratio implies more claims being settled by the insurance company.
Overall, the higher the percentage of the settled claims, the better are the chances that your life insurance policy claim will be accepted and settled by the insurance company. Know the high claim settlement ratio of insurers, Compare side by side, and Buy Life Insurance Policy from PolicyBachat.