Sponsored Love: Claim Settlement Ratio – What Does It Mean?

May 24, 2024

By HWM Partner

The financial security of your loved ones is a top priority, and term insurance is an important step towards accomplishing it.

The ‘Claim Settlement Ratio’ is an important parameter to consider while purchasing a term insurance plan in India. But what exactly does this phrase mean?

The Claim Settlement Ratio (CSR) is a numerical representation of the number of claims settled by an insurance provider compared to the total number of claims received in a particular time. Simply put, if an insurer receives 100 claims and settles 95, its claim settlement ratio is 95%. This ratio is important because it demonstrates the insurer’s dependability and efficacy in resolving claims, assuring future policyholders of the insurer’s commitment.

Checking the claim settlement ratio is crucial for several reasons –

  • Trust factor

The CSR Ratio (CSR) is a direct measure of an insurer’s reliability. A high CSR means that the insurer has settled most of its claims in the past, which helps to build trust and confidence among potential and existing policyholders. It guarantees them that the insurer is most likely to pay their claims in their hour of need.

  • Assurance

A good CSR provides policyholders with confidence that the insurer will likely pay claims when the need arises. It is a promise of the insurer’s loyalty to its policyholders that gives them peace of mind.

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  • Financial security

Term insurance is mainly bought for the security of the policyholder’s dependents in case of the policyholder’s untimely death. A high CSR indicates that the insurer has a good chance of settling claims, which in turn ensures that the policyholder’s dependents are financially secure.

  • Evaluation

CSR serves as an important aspect which helps to assess and compare various insurance companies. A high CSR can be a deciding factor when choosing between two providers with similar offerings.  It also serves as a differentiator in the market, which ultimately enables potential policyholders to pick the most suitable provider for them.

  • Risk assessment

CSR further helps to evaluate the claim rejection risk. In the case of an insurer with a high CSR, the chance of claim rejection is lesser, and thus the risk is lower for the policyholder. However, an insurer with low CSR also raises the possibility of claim rejection, which is an indicator of the high risk of policyholders.

How do you choose an insurance provider with a high claim settlement ratio?

A high claim settlement ratio indicates the credibility of an insurance provider. Here are the top points to consider while zeroing in on such an insurer –

  • Regulatory reports

The Insurance Regulatory and Development Authority of India (IRDAI) comes up with annual reports encompassing the performance data of all the insurance companies. This refers to the claim settlement ratio (CSR) which is a good indication of the company’s history in the settlement of claims.

  • Consistency

One year of high CSR may not be enough. Identify insurers with high CSR ratings in the previous few years. This consistency indicates the insurer’s commitment to honouring the claims of the insured.

  • Insurance portfolio

A range of insurance portfolios demonstrates the insurer’s capacity to serve different customer segments. This demonstrates that the insurance company has products for different age groups, risk preferences, and coverage options, which in turn help to enhance its credibility.

  • Company’s reputation

The image of an insurance company can be judged by its market position, its client base, and its public perception. A company that has a good reputation is more likely to keep high CSR to maintain its reputation.

  • Claim settlement process

The insurer that has a simple, straight, and fast claim settlement process is likely to have a good CSR. Checking this process can give you an idea of what to expect when filing a claim.

  • Customer reviews

Customer reviews allow us to see the real picture of a company’s claim settlement process. Positive reviews about the claim settlement may be a hint to high CSR.

  • Financial solvency

The financial solvency of an insurer provides a measure of its financial strength and stability. An insurance company with a strong financial position is more able to pay claims quickly and therefore can offer a high CSR.

  • Policy terms & conditions

A clear understanding of the policy’s terms and conditions makes the claims settlement process much easier. It enables one to know what is covered and what is not, hence one is not shocked when filing a claim.

  • Policy exclusions

Every insurance policy contains exclusions – circumstances in which the policy does not offer coverage. Being aware of them can help prevent claim denials.

  • Premiums

While a high CSR is necessary, reasonable premiums are also essential. Striking a balance between the two makes insurance an excellent choice.

  • Claim settlement time

The insurer’s average time to resolve claims might show its efficiency. A short settlement time often indicates a high CSR.

  • Solvency ratio

The solvency ratio assesses an insurer’s financial ability to satisfy long-term obligations. A high solvency ratio may be an indirect sign of good CSR.

  • Value-added services

Some insurers provide extra services, like as wellness programs and online consultations. These not only improve your insurance benefits but also demonstrate the insurer’s customer-centric attitude.

  • Customer service

Efficient customer service may help the claim settlement process go more smoothly. A timely and attentive customer service staff is frequently indicative of a high CSR.

  • Expert advice

Consulting with financial consultants or insurance specialists can give useful information. Their viewpoint might help you compare insurance and choose one with a high CSR.

Final thoughts

In conclusion, the claim settlement ratio is an important consideration when selecting a term insurance company in India. A high CSR not only indicates the insurer’s dependability but also protects your loved ones’ financial interests.

Furthermore, it indicates the company’s dedication to upholding its policy promises, offering confidence in the insurer’s reliability. To provide optimum financial security for your family, examine the CSR of several insurance companies before making a final selection.

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