Know How Check the Claim Settlement Ratio

Most people usually buy life insurance policy by merely comparing the premium amount which they would need to pay and thereafter, finalize on their insurance policy. However, this is usually not the correct assessment of selecting the ideal plan for you. Several factors such as the insurance provider’s brand and reputation, product suitability as per your needs, customer service, claim settlement ratio, the financial standing of the insurer, and other aspects need to be looked as closely.

One of the most critical parameters to consider your insurance provider is their claim settlement ratio. This is the aspect where many huge players also may not match up to your expectations. Policyholders need to take into consideration that the actual moment of truth for any insurance holder is at the time of claim settlement. This is where your claim settlement ratio comes into play.

What is Claim Settlement Ratio?

The ratio of the number of claims settled by the insurance company to the number of claim intimations filed with them is the claim settlement ratio. In simple words, it is the percentage of claims and insurance settlement made by the insurance provider in the year. Higher the claim settlement ratio, higher the probability of your claim actually getting settled. Thus, a higher ratio builds more confidence in the minds of the consumers for the company when they buy a life insurance policy.

Importance of checking Claim Settlement

The claim settlement ratio reflects the company’s risk management ability and how effectively it can wipe out incorrect or non-genuine claim settlements. Further, life insurance that are protection policies with no savings component are more prone to risk and frauds and therefore, have a relatively low claim settlement ratio. Therefore, when comparing claim settlement ratios of insurers’, it is important that you take into consideration the vintage, book size, product type, and the experience/ brand value. This will provide you with a more realistic picture. 

In addition to the claim settlement ratio, it is also integral that you analyze the amount of time it takes an insurer to do an insurance settlement. 

Claim Settlement Reports by IRDAI

The Insurance Regulatory and Development Authority of India (IRDAI) has issued a circular stating that insurance companies need to separate the claim settlement percentages for group and individuals. This will avoid reflecting an inaccurate picture to the customer. Further, you can check the claim settlement ratio for insurance companies for individual and groups through the IRDAI’s Annual. This ratio is also highlighted on the website of every insurance company specifically or a consolidated report on the Insurance Web aggregator’s websites. It is, however, still advisable that you view these figures on the IRDAI annual report since they have a set method of calculation for arriving at this insurance settlement ratio.

From this annual report, you can also get information pertaining to the claims pending, claims booked, total claims, claims rejected, claims approved, unclaimed, the break-up of claims depending on the policies, and claims at the end of the year.

You can download the IRDAI annual report, either in English or Hindi, by merely going on the IRDAI website (https://www.irdai.gov.in/) and click on the “Reports” tab on the left column. Thereafter, select the “Annual Reports of the Authority” option and download the PDF of the same for the specific financial year that you desire.

Summing Up

As a first-time insurance buyer, it is important that you look at various criteria before shortlisting on your preferred choice. Your life insurance cover should be at least 10-15 times of your annual income. Also, check the kind of product and features best suited to your needs, premium, and lastly the claim settlement ratio and claim settlement time. It is integral that you buy a life insurance policy that will adequately compensate for the financial and income loss to your family keeping in mind factors such as inflation, fluctuating interest rates, and future expected income.      

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