What is the Claim Settlement Ratio in Life Insurance?

What is the Claim Settlement Ratio?

Claim Settlement Ratio, or CSR in short, refers to the number of claims paid against the number of claims filed- the higher the ratio, the better it is for you. You must seek for those policies with a higher CSR to ensure that your claim is settled in case of your death with ease.

Every Year, the Insurance Regulatory and Development Authority (IRDAI) releases each insurer's Claim settlement Ratio. Every policy seeker must review this list to select the right policy for them. It is suggested that a customer buy a life insurance policy from an insurer with over 95% CSR for five consecutive years.

Why is Claim Settlement Ratio Important?

The claim settlement ratio is important for ensuring your family's financial security. The primary purpose of life insurance is to protect against unforeseen events, but this goal is undermined if the insurer does not meet its obligations. On the other hand, a high claim settlement ratio assures that most claims are processed smoothly and transparently, which means your loved ones are more likely to receive the promised benefits without issues. Furthermore, a consistently high claim settlement ratio over time demonstrates the insurer’s reliability and commitment to paying out claims, reducing the risk of failing to honour their compensation obligations.

How to Use CSR When Choosing a Policy:

• Compare Insurers: When evaluating different insurance providers, compare their CSR figures. A higher CSR generally indicates a better track record of settling claims.

• Consider Historical Data: Look at the insurer's CSR over several years rather than just the most recent year.A consistently high CSR is always a good sign.

• Read Reviews and Reports: Consult independent reviews, customer feedback, and insurance reports to gain insights into the insurer's claim settlement practices.

What is the Method of Determining Claim Settlement Ratio?

The claim settlement ratio, as mentioned before, is the number of claims paid against the number of claims received. If an insurance company gets 5000 claims in a year and pays 4750, their CSR will be (4750/5000)*100=95%.

What are the Drawbacks of Claim Settlement Ratio?

The Claim settlement ratio is the approximate number of claims paid against claims filled. It is an estimated value and not an exact number for each policy type. Furthermore, CSR is represented as a percentage and not an exact value. This can provide misleading information. For example, if an insurance receives 1000 claims in a year and only rejects 100 their CSR is 90%. However, if an Insurance Company receives 10000 claims the following year and rejects only 500, their CSR will be 95% for the year. This increase in CSR provides a misleading picture since the company has rejected more claims in the latter year.

Wrapping it up!

Claim Settlement Ratio (CSR) is a key factor in deciding life insurance providers, reflecting their effectiveness in settling claims. A higher CSR indicates a greater likelihood that your beneficiaries will receive the promised benefits without complications. However, it’s important to use CSR alongside other criteria, such as the insurer’s financial stability and policy features, to make a well-rounded decision. By considering CSR and conducting thorough research, you can ensure you select the right life insurance policy that offers peace of mind for you and financial security for your loved ones.

FAQ's