Life Insurance Claim Settlement Ratio: Why Does Everyone Keep Emphasising It?

Life insurance is an effective way to offer financial security to your family in your absence. It ensures that all their needs will be met and that they can lead their life without any worries in the event of your unfortunate death.

And for that, you need to find an insurance provider with a good claim settlement ratio. This simply means that the insurer should be able to settle your life insurance claim in the hour of need.

Let us now find out what is the claim settlement ratio and why it is an important criterion when choosing a life insurance policy.  

What is Claim Settlement Ratio?

The claim settlement ratio represents the number of claims settled by the insurer within a specific period. It is the ratio of total claims received and total claims settled in a period, which is generally a financial year.

Simply put, the formula to calculate the claim settlement ratio is –

Claim Paid Ratio = (Number of death claims settled / Number of death claims received) x 100

This ratio is an objective measure of the insurer's reliability and is a crucial factor to consider before purchasing a life insurance policy. If a claim is not honoured, the main purpose of acquiring an insurance plan cannot be fulfilled.

This is why PNB MetLife has always strived to maintain a high claim settlement ratio in life insurance.

Why is the Claim Paid Ratio Important?

When you purchase a life insurance policy, your primary intention is to ensure that your family is financially protected in your absence. However, what if the insurance proceeds are not provided to your family after your demise? What if the claim process remains unresolved?

Furthermore, an unsettled claim can create a significant financial setback if your beneficiaries depend entirely on the insurance proceeds. Therefore, finding an insurance company with a good claim settlement track record is vital.

What Does the Claim Settlement Ratio Indicate?

The claim paid or settlement ratio indicates the number of claims settled by an insurer. For example, if an insurer has a claim settlement ratio of 95%, it means they have honoured 95 out of every 100 claims that they have received.

The Insurance Regulatory and Development Authority of India (IRDAI) publishes an annual report on the performance of insurance companies in the country, including details such as the number of policies sold, premium amounts, and the claim settlement ratio from the previous year.

With the advent of online insurance policies and platforms that allow you to compare plans, you may be enticed by low prices. While attractive features and benefits may be enticing, it is crucial to remember that if a policy does not meet your needs or provide value for money, it becomes worthless.

However, it is essential to choose an insurance provider with a proven track record of settling claims promptly and reliably. Purchase life insurance from an insurer that consistently maintains a high claim settlement percentage. This assures that your family's claims are more likely to be settled promptly when needed.

What is an Ideal Claim Settlement Ratio?

In India, the claim settlement ratio in life insurance has marginally increased in the last year, and it dwells in the range of 96% to 99%. The ratio should be considered healthy as it means that at least 96 out of 100 claims are settled. So, if you are looking for insurance company with a good claim settlement ratio, this is the range that you need to keep in mind. .

The higher the number, the better it is for you.

PNB MetLife’s Claim Settlement Ratio

PNB MetLife believes that your family should be financially secure at all times, more so in your absence. That is why we are always working towards a better claim settlement ratio each year!

We have successfully settled 99.06% of claims in individual life insurance policies for FY 2022-23, which can be considered as one of the best claim settlement ratios for a life insurance industry.

Conclusion

A high claim ratio is a clear indication of an insurance company’s strong underwriting practices and competence in managing risks. It demonstrates the company's efficiency in processing claims efficiently and identifying false or invalid applications. Moreover, it reflects the insurer's dedication to its policyholders. Hence, a high claim ratio instils confidence in the insurer's ability to handle legitimate claims effectively.