Claim Settlement Ratio For Life Insurance

What is Claim Settlement Ratio?

Claim Settlement Ratio (CSR) is the percentage of claims 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.

CSR is a reliable metric to determine if a certain life insurance company is the right option for you or not. You can easily find the different claim settlement ratio of life insurance companies on the official website of IRDAI (Insurance Regulatory and Development Authority of India).

Claim Settlement Ratio of Life Insurance Companies 2021-22

As discussed, IRDAI publishes the details of claim settlement ratio of life insurance companies 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 life insurance claim settlement ratio for the financial year 2021-2022:

What Does This Table Explain?

The Claim Settlement ratio of life insurance companies is an important factor in finding the right insurer because it helps customers assess the claim settlement abilities of the insurer. The highest claim settlement ratio in life insurance indicates the insurer's reliability, and that the company can be trusted for availing the best life or term insurance plans. On the other hand, companies with low life insurance claim settlement ratios signify low insurer credibility; therefore, not many customers will buy plans from them because of their inability to settle claims.

After looking at the table, the highest claim settlement ratio in life insurance is for Max Life insurance i.e., 99.34%. The max life claim settlement ratio indicates the fast settlement of claims. From the given table, it is very clear that Aegon Life, Max Life, and Bajaj Life are the top three insurers with the highest claim settlement ratio in life insurance and thus have a good ability to settle claims and a good chance of attracting customers’ attention.

It is suggested that customers should always make their choices smartly by comparing the claim settlement ratio of life insurance companies. Along with this, the health, age, and income of the person are also of great significance because, based on this, the insurance company decides the premium, payment term, and sum assured. Overall, the above table listing the life insurance claim settlement ratio of life insurers is good enough to select the best term plan.

How is the Claim Settlement Ratio of Life Insurance Companies Calculated? 

It's important to note that the Claim Settlement Ratio is calculated for all the insurance products collectively offered by the insurance company, not for individual products. 

To illustrate how this ratio is computed, let's take an example to understand the calculation of the CSR: 

 Imagine a life insurance company receives 1,000 claims within a year. Out of these, they approve and pay the term insurance benefit (or sum assured) for 996 claims, while rejecting the remaining 4 claims.

The claim settlement ratio for the insurer would be (996/1000)% or 99.6%. 

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 out of 10,000 claims for 2021-22. The CSR will be 96%.

What is a Good Claim Settlement Ratio? 

The higher the % of claims settled, the better the chances that your life insurance claim will be approved and then settled by the insurer. Another important of a high CSR is the finances of an insurer. With a percentage of settlement above 95%, a prospective insurance buyer can be very sure that the company is financially secure. Also, they can pay most of their clients the life insurance claim amount. 

You should also consider various factors like the insurer’s online review, the experience of your family and friends, and the benefits of the life insurance policy before making an informed choice. 

Why Claim Settlement Ratio of Life Insurance Companies 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 does not 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. You can do this by checking the claim settlement ratio of life insurance companies in India and opting for the company with the most suitable or highest claim settlement ratio in life insurance. This way, you can be assured that your family does not have to go through a tough time to receive the sum assured amount.

2. Indicates the reliability of an insurance company

   The Claim Settlement Ratio of life insurance companies 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.

What is the Time frame for Receiving a Claim Payout? 

The speed at which your beneficiaries get the claim payout depends on how promptly they submit a claim and complete the necessary paperwork. If the information is accurate, an insurance company can process and pay the claim within as short a period as one to two weeks.

Some of the ideal situations are: 

• The life insurance plan is active for 3 years or more 

• All premiums paid for the insurance plan 

• The death's circumstances do not raise suspicion. 

Types of Life Insurance Claims

Now that we have understood the claim settlement ratio of life insurance companies let us take a look at 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

Points to Remember While Checking of Life Insurance Claim Settlement Ratio

Here is what we understand from the above table:

• Always opt for a life insurance claim settlement ratio of more than 90%. 

• Check the claim settlement process and the time taken by the company to settle claims.

• The higher the life insurance sales, the higher will be the average claim paid value.

• Various insurers have maximum claim rejections within the first 2 policy years.

Wrapping It Up!

One should always be aware of the highest claim settlement ratio in life insurance 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. In addition, you should consider other important features also in choosing the best term, and plan as per your life goals along with claim settlement ratio of life insurance companies 2023.

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