Life Insurance Claim Settlement Ratio

Claim settlement ratio is one of the important parameters that one should consider while deciding on the insurer to purchase a life insurance plan.

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Keeping your best objectives in mind, we have put every key fact together about claims that can be useful at the time of buying a life insurance plan:

What is Claim Settlement Ratio? 

Claim Settlement Ratio (CSR) is the percentage of claims that an insurer settles in a year out of the total claims. It indicates the credibility of an insurance company. As a simple rule, the higher the CSR, the more reliable the insurance company is. 

You can easily find the claim settlemrment ratio of different companies on the official website of IRDAI (Insurance Regulatory and Development Authority of India). 

Let’s understand this with the help of an example: 

Let’s say that a life insurer receives 1000 claims within 1 year, out of which it settles 993 claims by paying the sum assured i.e., insurance benefit while rejecting the rest of the 8 claims. 

The CSR for the company would be 99.3% (993/1000) %

Why Claim Settlement Ratio of Life Insurance is Important? 

  1. Helps in assuring the financial security of your family members 

    The main objective of purchasing life insurance is to provide financial security against unfortunate events. However, the purpose will be crushed if the company doesn’t honor your claims. On the contrary, if the insurance company considers most of the claims, your family will more likely to have a transparent, hassle-free, and simple claim process. This way, you can be assured that your family does not have to go through a tough time for receiving the sum assured amount 

  2. Indicates the reliability of an insurance company 

    The CSR indicates the ability of a company to pay the sum assured to you or your beneficiary/nominee. If the insurance company has been maintaining high CSR over a substantial time, then they can settle claims quickly. 

How To Calculate Claim Settlement Ratio? 

The CSR is calculated using the following formula: 

CSR = (Total claims settled in 1 year/Total claims in a year) X 100 

For instance, if company X has settled 9600 claims out of 10000 claims for 2020-21. The CSR will be 96%.

Claim Settlement Ratio of Different Life Insurance Companies 

As discussed, IRDAI publishes the details of claim settlement of all the insurers in India on a yearly basis. This report involves the correct figures and % of the number of claims made by the life assured, number of claims rejected and number of claims settled.

Let’s take a look at the CSR of different types of life insurance companies as per IRDAI Annual Report.  The table below illustrates the claim settlement ratio for the financial year 2020-2021:

Insurance Provider Death claims booked  Claim settlement ratio Death Claims Paid  Claims Pending at the end of period 
Aegon Life 401 99.25% 398 0
Aviva Life 1050 98.01% 1034 0
Ageas Federal  1800 95.07% 1716 2.77%
Bajaj Allianz 14331 98.48% 14115 0.03%
Bharti AXA Life 1891 99.05% 1875 0
Aditya Birla Sunlife 6455 98.04% 6347 0.17%
Canara HSBC 1897 97.10% 1844 1.32%
Pramerica Life 645 98.61% 638 0.15%
Edelweiss Tokio 502 97.01% 487 0.40%
Exide Life 5014 98.54% 5052 1.25%
Future Generali 1223 94.86% 1163 0.65%
HDFC Life 16941 98.01% 16639 1.05%
ICICI Prulife 14734 97.90% 14518 0.11%
India First Life 2972 96.81% 2886 0.50%
Kotak Mahindra Life 4393 98.50% 4336 0.36%
LIC 941101 98.62% 933889 0.18%
Max Life 20051 99.35% 19922 0
PNB MetLife 5315 98.17% 5218 0
Reliance Nippon Life 9414 98.49% 9274 0.04%
Sahara Life 839 97.18% 860 0.23%
SBI Life 34183 93.09% 31855 2.67%
Shriram Life 3681 95.12% 3506 0.30%
Star Union  1632 95.96% 1569 0.49%
Tata AIA Life 4648 98.02% 4556 0.04%

The Claim Settlement ratio is an important factor to rate the insurer because it is the only type of ratio that customers use to select the plan. The high claim settlement ratio indicates the reliability of the insurer and that company would be trusted for availing the best life insurance plans. On the other hand, low CSR signifies that the insurer’s credibility is less and therefore they will not attract a large number of customers because of their non-ability to settle claims. 

After looking at the table, the highest claim settlement ratio is for Max life insurance i.e, 99.35%. With the given table it is very much clear that Max Life, Aegon Life, Bharti AXA, LIC, and Pramerica Life are the top five insurers that have a good ability to settle claims and thus have a good chance of attracting customer’s attention.

It is suggested that customers should always make their choices smartly depending on the insurer’s last performance through their CSR. Along with this, the health, age, and income of the person are also of great significance because on the basis of this insurance company decides the premium, payment term, and sum assured. All in all, the provided table of CSR of top term life insurers is good enough to select the best term plan. 

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Types of Life Insurance Claims 

Below are the two types of life insurance claims: 

  1. Maturity Claims

    Maturity claims are paid during the maturity of the life insurance plan. This simply means that when the policy term ends and the life assured outlives the whole policy term, a certain sum is paid to the life assured. In this, the life assured is required to fill a completely filled and signed discharge application to get a maturity claim. The sum received from the maturity claims is free of tax as per the ITA, 1961. 

  2. Death Claims 

    In this, the claimant can request death benefits on the policyholder’s death. This simply means a sum assured amount is settled towards the nominee upon the policyholder’s death. The death should be intimated to the insurance company. The amount received as the death claim benefit is considered free of taxes u/s 10(10D) of the ITA, 1961. 

Steps Involved In Claim Settlement Process  

The claim settlement procedure is really easy and hassle-free. It is a 3 step process: 

  1. Claim Intimation 

    The nominee should inform about the claim to the insurer in written form as soon as possible. The information should comprise the policyholder’s name, policy number, death place, death date, claimant’s name, etc. The nominee/beneficiary can avail of the application of claim intimation by visiting the nearest insurer’s branch or can download it from the official insurance company’s website. 

  2. Submit All the Relevant Documents 

    In order to get your claim settlement quickly, it is important that you should submit the relevant documents requested by the insurance company. 

  3. Claim Settlement 

    The insurance company is required to settle the claim within 30 days of receiving all the documents which are submitted by the policyholder. 

    However, there are some cases where an insurance company requires further investigation. In this case, the company has to complete all its processes within 6 months from the time of receiving the claim application in written form. 

Documents Required For Claim Settlement Process 

The nominee/beneficiary will be required to give the following documents to the company: 

  • Completely filled and signed claim application form

  • Original certificate of policy 

  • FIR 

  • Reports of post-mortem 

  • Certificate of death issued by a local authority 

  • Photo ID proof of claimant 

  • Address proof of claimant 

  • Discharge summary of hospital 

  • Documents of KYC such as photo ID copy, address proof 

  • Cancelled cheque copy and bank statements 

  • Any other documents asked by the company 

What are the Common Reasons for Rejecting Life Insurance Claims? 

Here are some of the most common reasons for rejecting life insurance plans: 

  • Mentioning false information or inaccurate information in the application form of a life insurance policy 

  • Not paying premium amounts on the due date or during the grace time 

  • Causes of Death that are not covered by the insurance plan like suicide before completing 1st policy tenure, and accidental death caused by overconsumption of drugs/alcohol.

  • A falsified claim made by the policy’s beneficiary 

Wrapping It Up!

One should always be aware of the claim settlement ratio (CSR) while purchasing a term plan. Using an online facility, you can easily avail of a term plan hassle-free. By disclosing details about your medical conditions, earnings, and other information, you will receive a high SA and it becomes easy to process the claims. The rejection of a life insurance plan based on the non-disclosure facts or misrepresentation and fraud has a negative effect on the CSR of an insurance company. Also, you should consider other important features also in choosing the best term, and plan as per your life goals.

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