Life Insurance Claim Settlement Ratio And Its Importance

In India, most life insurance buyers tend to make their buying decision based on the premium amount. They choose an insurer that offers them the policy at the lowest price. While the premium amount is important, you must not overlook another critical factor – the insurance company's claim settlement ratio.

A claim settlement ratio (CSR) of an insurance company refers to the number of claims they have successfully settled against the number of claim requests received in a year. For example, if XYZ company received 100 claim requests in a year, and they successfully settled 90 requests, then the company's CSR is 90%.Many experts recommend choosing an insurer with the highest CSR while buying a policy to ensure that your appointed nominee has better chances of getting the policy benefits. A higher CSR also means that your family receives the insurance benefits they need in your absence.

It is no good enough to have a desirable claim settlement ratio for just one or two years. Consistence of claim settlement ratio of the insurance company you choose is as important as it is necessary to check the CSR in first place. It is suggested that during the process of buying an insurance plan, one must check the claim settlement ratio of the insurance company for the past five years at least.Thus, it is important that the claim settlement ratio remains consistent for at least a decade. Smaller the range of claim settlement ratio is considered to be better and reliable option. An insurance company having CSR ranging between 90% - 97% is more trustworthy than the one having a CSR ranging between 75% - 94%.

Remember, a life insurance policy is a long-term financial product; you must pay the premium over a policy tenure to enjoy its benefits. So, for any reason, if your claim gets rejected in the future, it may have a significant impact on your financial planning.Being aware of the claim settlement ratio of the insurance company beforehand will help you ascertain if the company can be trusted to settle your claim without any hassles. You must consider a CSR of at least 85% or more as a benchmark while choosing the insurer to purchase your life insurance policy.Irrespective of the type of life insurance plan you purchase, be it a whole life plan or a term plan , you must check the specific plan's claim settlement ratio. Imagine a situation where the insurer rejects the claim filed by your nominee after your demise; it may leave your family in a financially terrible situation. As a responsible investor, you must check the CSR of the plan you purchase so that your family gets the benefits when they need it the most.The IRDAI (Insurance Regulatory and Development Authority of India) publishes the CSR of different insurance companies on their website.Thus, CSR is important to get your claim settled promptly and get the necessary support you need in an emergency. It also ensures that your family is sufficiently protected if any unfortunate event causes your untimely death.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.