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Importance of Checking Claim Settlement Ratio before Buying Life Insurance

Claim settlement ratio of more than 85% makes the insurer trustworthy. But having CSR of more than 90-95% is a better option. Know the importance of checking term insurance claim settlement ratio.

  • 25,410 Views | Updated on: Feb 23, 2024

The importance of a life insurance plan is immeasurable in a family that has only one earning member. In case the breadwinner loses his or her life due to an accident or illness, the whole family suffers emotional, as well as, financial stress. If you are always worrying about your family for the same reason then it is time for you to buy a life insurance policy. It will provide your loved ones the financial support they need in the time of emergency. Before you buy the insurance plan, do not forget to compare the term insurance claim settlement ratio of different insurers to understand which insurance company will be the best for you.

What is a Claim Settlement Ratio?

A claim settlement ratio of an insurance company is the number of claims settled against the number of insurance claims filed. When a life insurance policyholder passes away and an insurance claim is made, the insurance companies follow certain rules and conditions before settling the claim. Not every claim is approved as some of them might not meet certain policy requirements. The claim settlement ratio can be used as a measurement to determine if a certain policy is right for you or not.

Formula to Calculate Claim Settlement Ratio

Claim Settlement Ratio or CSR can be calculated by taking the total number of insurance claims settled by the insurer and divide it by the total number of insurance claims received by the insurer.

Let’s consider the claims settled by the company are 90 and the claims filed by policy holders are 100 in a year,then the CSR of that insurance company will be:

CSR = Total no. of insurance claims settled successfully / Total no. of insurance claims filed by the policyholders

= 90/100

= 90%

Why Is Claim Settlement Ratio so Important?

When buying life insurance, you need to check various aspects before deciding which insurance company is right for you. You have to find out about the various policies and covers offered by the insurance company. You need to know how their customers review them in terms of services and customer relationship management. However, many people ignore the need to check the claim settlement ratio, which is a huge mistake. Here are two reasons why IRDA claim settlement ratio is important:

1. Measure the insurer’s reliability

The life insurance policy is a big investment plan. You have to pay a good number of premiums over a long duration to avail of the benefits offered by the policy. So, if your claim is rejected for some reason in the future then that can seriously hurt your financial planning. The settlement ratio is a very reliable measurement indication that helps you know if a certain insurer is trustworthy or not. A favorable ratio indicates that the insurer is right for you.

2. Gives assurance about your dependent’s financial future

Checking the term plan claim settlement ratio is important to ensure the financial security of your family. The last thing any family can endure after suddenly losing a family member is the rejection of an insurance claim. It is your job as a policyholder to make sure that your family does not have to go through that trouble. With the help of the settlement ratio, you can make the right
decision when buying a policy.

What to Look for in Claim Settlement Ratio

1. A claim settlement ratio of more than 85% is a good sign, making the insurer trustworthy. But insurance companies having a high CSR of more than 90-95% is a better option.

2. You should refer to the persistence ratio of an insurer to know how persistent policyholders have been in renewing their policies. This shows the policyholder’s trust in the long-term insurance products and the services offered.

Points to Remember

1. The claim settlement ratio not only contains term insurance but also other life insurance products. Hence, having a client base that purchases other types of insurance products, for returns rather than life cover, benefits the insurer.

2. Many insurance companies have to remove fraudulent cases which leads to a decrease in CSR. This cannot be blamed on the insurer as it is vital to eliminate such frauds.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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