Claim Settlement Ratio: What is it And Its Significance

When buying a Life Insurance Policy , several factors must be considered, including the ideal coverage, premium payable, policy term, etc., which are just a few factors that help you decide which plan to opt for. However, choosing the right insurer is also equally important. One aspect often overlooked while selecting the insurer is the Claim Settlement Ratio. This article will discuss Claim Settlement Ratio, why it is crucial, and how it can help you choose the right insurance provider.

Claim Settlement Ratio (CSR) refers to the number of claims an insurance provider has settled successfully against the number of claims received during a year. Each plan offered by your insurer has a unique CSR, and you should double-check the value of the plan you intend to choose.The CSR is a percentage calculated by dividing the number of claims settled in a year by the total number of claims received in a year, multiplied by 100.Claim Settlement Ratio = total number of claims approved / total number of claim applications received X 100For example, suppose an insurance company, XYZ Limited, receives 100 claims under its term life insurance product during a particular year and settles 95 of those claims. In this case, the Claim Settlement Ratio of the Term Life Insurance plan offered by XYZ Limited would be 95%. Also Read: How to claim Life Insurance death benefit?

A higher profit figure usually translates to a financially healthy company that makes for a sound investment. Similarly, the Claim Settlement Ratio can help determine which insurer is worth your time and money.
Claim Settlement Ratio helps you spot the following:

Insurers with a good track record of clearing claims:

A life insurance policy is a long-term financial product in which you continue paying premiums during the policy tenure to enjoy its benefits. If your claim gets rejected in the future, it can significantly impact your financial planning. Additionally, your nominees could face significant financial hardship as a result. Therefore, being aware of the Claim Settlement Ratio of your Insurance provider beforehand will help ascertain if it can be trusted to settle your claim without any major hassles.

Insurers with financial stability:

A higher CSR represents the insurance company's dedication to honouring claims and reflects the insurance company's financial stability. If an insurance company has a relatively higher CSR, it means it has the funds necessary at its disposal to honour the claims made by its customers.

Insurers with strong underwriting processes:

Underwriting evaluates the policy buyer's application and determines the risk factor based on their medical and financial information. A healthy CSR implies that an insurance provider successfully manages the risk it assumes by approving an applicant's insurance policy, indicating a superior underwriting process.

Insurers with easy and quick claim process:

Life Insurance plans are bought so your loved ones can get financial aid during an emergency. A high CSR indicates that the claim process is swift and uncomplicated and that your nominees will have little difficulty getting the agreed-upon pay. Also read: Tips for hassle-free Life Insurance claim settlement

Choosing a Life Insurance plan by quickly glancing at an insurance company’s Claim Settlement Ratio is not the ideal way to apply the metric. These tips will help you make greater use of CSR and gain a more accurate understanding of the offerings of your insurance company.

Look at the Claim Settlement Ratio across multiple years:

Looking at the Claim Settlement Ratio of an insurance provider for just one year gives you only one piece of the picture. For a more comprehensive view, it is advisable to check the CSR of the insurance company for at least the past five years. The insurance regulatory and development authority of india (IRDAI) publishes the Claim Settlement Ratio for Life Insurance providers annually. You can visit the IRDAI’s website for more information on the same. Apart from the CSR report, IRDA also publishes the annual report relating to the claim rejection ratio and the claim pending ratio. These can also be helpful.

Check the consistency of the Claim Settlement Ratio:

You may have heard the proverb – consistency is key. It applies to insurance as well. Not only does an insurer need to have a strong CSR, but it also needs to be consistent across several years for you to make wise decisions regarding your choice of provider. Also read: What are the alternatives if your Life Insurance claim gets rejected?

Alas, a financially sound insurer carrying healthy CSRs across its plans does not guarantee that it will accept all claims. If an insurer finds inconsistencies in your claim, it has every right to reject it. To avoid such situations and increase the chances of your claim getting accepted, follow these pointers:

Provide accurate information

First and foremost, always try to provide accurate information to your insurer, whether it concerns lifestyle habits, medical history, earlier insurance policies, etc. If you’re a heavy smoker or drinker, it’s advisable to inform your insurance provider about your habits as early as possible. You may pay higher premiums by disclosing such information, but hiding it increases the risk of claim rejection if discovered later.

Inform your insurer about the claim as early as possible

Your insurer may have a stipulated period to accept certain claims. Claims made beyond the time frame can get rejected. That is why informing your insurer about the claim you intend to make as early as possible is advisable. For instance, most insurers grant 90 days for making post-hospitalisation claims. If you make such claims after 90 days, your insurer may reject them.

Do not make any mistakes on your nomination form

Details of your nominee, such as age, gender, contact number, relationship to the policyholder, and so on, must be filled in accurately. Your nominee will ultimately receive the insurance claim, and inconsistencies in the form may create hassles during the claim process.

Declare earlier insurance policies (if applicable)

Withholding information can lead to complications during the claim process. It’s better to inform your insurer about any earlier policies you may have had or existing ones to avoid such situations.

• Claim Settlement Ratio is an important metric that helps you understand which insurance provider is more likely to honour the claims made as per your policy’s terms and conditions.
• Every insurance plan has a separate Claim Settlement Ratio. Be sure to check the CSR of the specific plan you wish to buy.
• Looking at an insurer’s Claim Settlement Ratio over multiple years and judging its consistency is a more optimal way of utilising the metric to your benefit.