Claim Settlement Ratio: Overview, How it Works?

Buying life insurance is like having a safety net for all your life. With a wide variety of policies, it is not difficult to find one that is well-suited to your needs.

But, when buying an insurance policy of this type, paying attention to the claim settlement ratio of your insurer should be one of your top priorities Why?

Let us know what a claim settlement ratio is, its importance, why you should consider it, and how it works.

What Is a Claim Settlement Ratio?

It is the ratio of insurance claims successfully settled by the insurer compared to the claims raised by the policyholders or their nominees.

Let us try to understand this with an example. Suppose a life insurance provider has a CSR (Claim Settlement Ratio) of 85% then if a company has 100 death claims requests in a year (including carry forwarded cases of the previous year), then it has settled 85 claims successfully.

An insurance company having the best claim settlement ratio in life insurance may have a good history of honouring claims and allowing the policyholder to get much-needed financial help in an emergency.

Importance of Claim Settlement Ratio

Claim Settlement Ratio is one of the most important factors that ensure a trouble-free claim settlement process. A high CSR means that an insurer is efficient in settling claims of most of the policyholders, which, in turn, signifies the reliability of the insurance company.

There are many benefits of choosing an insurer that has a high claim settlement ratio; some of them are:

• Greater Financial Security- Getting policy benefits on time is the best financial security you can get. A high term plan claim settlement ratio indicates that there is a higher probability of you getting your sum insured in the event of death. You must ensure all the disclosures made to the company are complete and correct to enjoy hassle free claims settlement.
• Reliability-A high claim settlement ratio indicates that your insurer is reliable and there is a high chance of your claim getting settled without much hassle. So, you can rely on your insurer in times of need. It is important to submit all the required documents on time.
• An Easy Life Insurance Claim Process- The higher the claim settlement ratio the easier it is to get your claim settled without difficulties. Insurers with a high CSR usually have a transparent, quick, and customer-friendly claim settlement process, which makes it easier for you to file a claim. Having said, it also depends on the transparency maintained by the customer in making the disclosures to the company. Ensuring the latest details of the nominee are updated with the company will also aid company to settle the claim in a smooth manner.

How Does Claim Settlement Ratio Work?

IRDAI (Insurance Regulatory and Development Authority) issues the claim settlement ratios of all life insurance providers every year.

The data released by this authority helps people who want to buy a life insurance policy to get a transparent overview of the insurer's performance and consistency in settling claims throughout the years.

The formula for calculating claim settlement ratios is as follows:

CSR= (Total number of claims settled during the year/ (Total number of claims received during the year + Claims Outstanding at the beginning of the year)*100

What Is an Ideal CSR?

There is no particular percentage of a good CSR. However, insurers having a CSR exceeding 90% are chosen by many people.

This is because:

• It indicates the reliability of the insurance company.
• It helps in making an informed decision when purchasing a life insurance policy.
• It shows how stable an insurer is.

Conclusion

A claim settlement ratio is more than just a number. It is a complete picture of an insurance company’s efficiency in satisfying its customers by processing their claims promptly.

Term insurance claim settlement ratio helps in navigating through the confusing world of insurance as choosing an insurance policy is a daunting task.

An insurance company with a high CSR is considered to be an ideal choice as it highlights the financial stability and credibility of the insurer along with ensuring that your chosen insurer has a smooth life insurance claim process.

PNB MetLife offers an extensive range of life insurance plans suitable for retirement, child education, and several other situations for which you need to have guaranteed financial protection. Moreover, PNB MetLife's claim settlement ratio stands at an impressive 99.20%.