Life is a roller coaster ride. It is always good to have a seat-belt on. Consequently, insurance is that seat-belt that keeps you safe during the ride. Even if the ride is a bit uncomfortable or leads to an accident, it helps you or the legal heir get the dues in your absence. It is subsequently important to determine the right insurer with a good track record claim settlement ratio. We discuss the same in the following analysis.
What is Claim Settlement Ratio?
Claim settlement ratio or CSR is a benchmark that shows the percentage of claims an insurance provider has settled within a given financial year. Moreover, it is the percentage of total claims paid off by an insurance company to the total number of claims received by it. 95% CSR means that out of 100 claims received by the insurance company, it has settled 95 claims and rejected 5 others.
Claim Settlement Ratio = (Total claims paid off by the insurer)/(Total number of claims received) * 100
What are the implications of the Claim Settlement Ratio on you?
It goes without a doubt that the goal of having an insurance policy is to provide financial security to your family in your absence. Consequently, the claim settlement ratio becomes important. A higher claim settlement ratio will be ideal. It is important for you as a customer to find the companies with the highest CSR.
Claims received by an Insurance Company
IRDAI (Insurance Regulatory and Development Authority of India) calculates and subsequently publishes the claim settlement ratio for the public. IRDAI makes public these numbers at the beginning of the first month of each year.
When a policy-holder looks at these ratios, he should not look at them alone. He should also look at the number of claims received by the company.
For example, if an insurance company says it received 100 claims and has settled 98 of them, with 1 being rejected and 1 pending. The claim settlement ratio is 98% which is a good number. However, the number of claims received by the company is far less as compared to a company getting 10,000 claims, and having a settlement ratio of 95%.
The investor must take the complete picture into a note about the various details of the company and make a decision accordingly.
Consistency of Claim Settlement Ratio
Above all, how consistent an insurance company has been over the years in fulfilling the maximum number of claims it received is important.
Consequently, the claim settlement ratio of the company for the past 5 years must be verified. This feature should not have any inconsistency.
Henceforth, the smaller is the range of the CSR, the more reliable the company is. A 90% to 97% range is considered more reliable as compared to a range of 75% to 94%.
Important numbers of Claims Settlement Ratio
| Position | Name of the Insurer (Public Undertakings) | CSR in % as on 31st March 2018 | CSR in % as on 31st March 2019 |
| 1 | New India | 93.06 | 92.44 |
| 2 | Oriental Insurance | 87.65 | 90.13 |
| 3 | National Insurance | 72.57 | 85.43 |
| 4 | United India Assurance | 75.69 | 84.45 |
| Position | Name of the Insurer (Private Sectors) | CSR in % as on 31st March 2018 | CSR in % as on 31st March 2019 |
| 1 | IFFCO Tokyo | 90.69 | 92.66 |
| 2 | HDFC Ergo | 81.25 | 90.32 |
| 3 | Bajaj Allianz | 85.70 | 88.35 |
| 4 | Royal Sundaram | 87.14 | 86.79 |
| 5 | TATA AIG | 84.55 | 85.99 |
| 6 | Universal Sompo | 79.59 | 82.58 |
| 7 | ICICI Lombard | 79.55 | 79.98 |
| 8 | SBI General | 72.23 | 76.20 |
| 9 | Reliance | 76.67 | 74.96 |
| 10 | Cholamandalam | 68.97 | 70.31 |
Data Source = Wish Policy
Things to remember while finalizing an Insurance Company
- The company must have a high CSR for 5 consecutive years: The difference should be thus in the range of 90% to 97%. Also, a higher CSR means that the company is reliable.
- The company’s history and reputation: Although a lot is said and advertised, a policyholder must go through the details about the insurance company they plan to select. The historical data about the company is important as it helps in identifying whether they pay-out their customers in need or not.
- Must have a high claim intake: It is important to note that an insurance company should have a high claim intake as well as a high settlement ratio. It subsequently reflects the efficiency and reliability of the company.
- Should fit in your objectives: It is the most vital of all aspects while you decide which company to go for. Your objectives (duration, terms, coverage, etc.) should fit in the company’s policy guidelines and it should be carefully verified before making any commitments.
Importance of Claims Settlement Ratio
- Firstly, in the most unfortunate event of the death of a policyholder, their family will get the coverage amount.
- Secondly, it helps the family look after their current and future financial needs. It also helps them stay independent and safe.
- Thirdly, the reliability of the company is important as they have to pay-out the insured sum. The most reputed and old companies are hence best to be relied upon.
- Fourthly, it is calculated by the IRDA and is government verified. The figures are therefore genuine and should help the policyholders to decide about the right company as per their needs.
- It is thus handy data that helps a customer to analyze and ascertain the genuine companies that are delivering on their promises. Like chaff that gets separated from the wheat, similarly, CSR separates the good companies from the bad ones.
Reasons why policy claims get rejected?
- Careless about Life insurance: On the whole, the internet is flooded with a variety of companies that compare the costs and benefits of insurance schemes, it is important that you do your own research. Furthermore, going for a scheme blindly can get you an average deal.
- Incomplete or wrong information: The most common mistake many policyholders make is to provide either wrong or incomplete information. It can lead to immediate rejection of claims which can be harassment for the family. Be careful while you fill the forms and provide authentic details.
- Hiding medical history: Another important point to note is to always provide your correct medical history to the insurer, like alcohol consumption, smoking, etc. This consequently ensures that there are no glitches in the claim settlement.
- Lapsing of policy: Furthermore, people often forget or are complacent to renew their policy on time. Generally, most companies offer a grace period to renew the premium. It is hence important to renew the policy at the mentioned time to avoid any future problems.
Conclusion
All said and done, your choice of Life Insurance is fundamental to your family’s safety. It ultimately decides the course of turn they will have to take in the distant future when you will not be with them. Claim settlement ratio or CSR is therefore key to your search for the right insurance company. Moreover, it helps you determine the most reputable and delivering companies. It is calculated each year by the IRDA(Insurance Regulatory and Development Authority) and is also reliable data.
One should be careful while doing their research on the companies and also make a note of the number of claims each company received. In effect, the 5-year data should be checked for each company and a 90% to 97% range is considered ideal. A higher claim intake as well as a higher CSR reflects the reliability of an insurance company. It will thus help your family’s claim in getting accepted on time. So gear up and search for a company that is right for you today!
