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IRDA Claim Settlement Ratio

The IRDA claim settlement ratio is defined as the percentage of settled insurance claims by an insurer compared to the total number of received claims in a year. Every year, the Insurance Regulatory and Development Authority of India (IRDAI) releases extensive data for all life insurance companies and their claim settlement ratios.

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The higher the ratio, the better it is for the insurance company. For instance, if the IRDA claim settlement ratio of an insurance company is 96%, it means that the insurance company has settled, i.e., paid the sum assured to the nominee(s), for 96 claims out of every 100 claims received. This also means that the remaining 4% of insurance claims are repudiated, rejected, unclaimed, or pending by the insurance company on various grounds. 

When one purchases a life insurance policy, one should be mindful of the fact that the nominee(s) or beneficiary (ies) should receive the sum assured after the death of the policyholder. After all, in the event of one’s death, the proceeds of the sum assured payment from the insurer shall ensure that the policy holder’s dependents have sufficient corpus to be financially secure. 

But what will happen if the insurer doesn't settle the nominee's claim? It is therefore important to understand which insurance plans company maintains a satisfactory track record in settling death claims. IRDA claim settlement ratio is a key factor to consider while evaluating a life insurance policy as it reflects the reliability of claims’ resolution by a life insurance company. A comparison of the IRDA claim settlement ratios of different insurance companies will go a long way in helping to choose a life insurance policy.


  • A1. Claim Settlement Ratio = (Total number of claims paid in a year) ÷ (Total number of claims received during the year). An insurance company discloses these numbers for any financial year on an annual basis. Besides, IRDAI publishes these ratios for each insurance company in India generally in the first quarter of a calendar year.
  • A2. The consistency of the ratio over a period of years is paramount. The 5-year historical claim settlement ratio of an insurance company needs to be analyzed to check for any inconsistency. An insurance company may be considered more consistent if its historic claim settlement ratio is in a narrower range. A company with a claim settlement ratio in the range of 91% to 98% may be considered more dependable than a company with a ratio in the range of 80% to 95%.
  • A3. The IRDA claim settlement ratio comprises an aggregate ratio for all the policies issued by the life insurance company and not the actual ratio for each type of policy issued viz. term insurance, endowment cover, group insurance, money back policy, individual cover, child plan, online plan or offline policy, etc. The ratio is expressed in terms of percentage and not a number. Hence, it does not provide a clear picture of how many claims an insurance company rejected in a year.
  • A4. Not only should one look at the number of claims settled, but also check the claim amount that the life insurance company has settled. A life insurance company may show a higher claim settlement percentage by a number of policies. However, the same percentage will be a lower percentage in terms of payments of the benefit amount. This may happen when the company settles a higher number of claims with lower amounts and rejects policies with higher claim amounts, i.e., policies with higher life insurance cover. Therefore, while selecting an insurance policy, make sure that the life insurance company has performed well on both the IRDA claim settlement ratio and the claim amount settled.
  • A5. Even if one has provided incorrect information or not disclosed some material facts about oneself, it is the life insurance company’s responsibility to investigate any faults within 3 years from the date of issuance of the policy, or the date of commencement of risk or the date of revival of the policy, whichever is later. E.g., let’s look at a scenario in which one purchases the policy today, and after a few years, the policy lapses due to non-payment of premium. If one chooses to renew the policy again, the 3 year period starts from the date of revival and not from the original date of issuance of the policy.
  • A6. Since the Insurance Regulatory and Development Authority (IRDAI) releases data on claim settlement ratios of all life insurance companies on an annual basis, it is recommended to check the ratio on an annual basis during the first 3 years of the policy.
  • A7. While evaluating the insurance companies with the highest percentage of settled claims settled, one needs to bear in mind the size of the insurance company. The size has a significant role to play in maintaining a healthy IRDA claim settlement ratio. It is relatively easier for an insurance company that is smaller in size to efficiently evaluate and manage the underwriting risks while issuing a new policy. Unlike a bigger insurance company, its size allows the smaller insurance company to conduct a thorough investigation at the time of issuing every policy and mitigate the risks associated with the underwriting of policies. 
  • A8. While buying life insurance products, one must disclose all facts transparently and in detail. This will go a long way in not giving any chance for the insurance company to reject one’s claim.
  • A9. The maximum time for claim settlement by the insurer should not be more than 30 days.

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