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Claim Settlement Ratio of Term Insurance Plan Providers

Claim Settlement Ratio (CSR) is an important parameter in the selection of an insurance policy. If you are going for a pure insurance plan, a term insurance plan is an ideal option. The term insurance plan is pocket-friendly, and the financial benefits are very high. However, you should understand the fact that the insurance company should pay the death benefit as per the contract executed by the policyholder. The claim should be made by the beneficiary, and it should be honored by the insurance company.

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What is Claim Settlement Ratio?

The term insurance claim settlement ratio, or CSR, is the ratio of the total number of approved claims and the total sum of claims received by the insurance company. This ratio is measured every financial year. The information is available on the official website of the insurance company. As a matter of fact, the claim settlement ratio is measured for all insurance products and is not confined to the term policy alone.

Example:

An insurance company received 1000 death claims between April 1, 2020, and March 31, 2021. If the insurance company paid 950 claims successfully, and 40 claims were rejected. The company is yet to decide the fate of 10 claims.

Therefore, the claim settlement ratio will be 950/1000= 95%

The claim rejection ratio = 40/1000 = 4%

The claim pending ratio = 10/1000 = 1%

In this above-discussed case, the remaining claims of 5 percent are excluded or not accepted by the insurance company. There are a number of reasons that an insurance provider may reject a claim, such as fraud, impersonation, misrepresentation, etc. The term plan claim settlement ratio of an insurance company gives a clear knowledge of the settled claims in a financial year. However, determining the company’s stability entirely based on the term plan claim settlement ratio of a company is not a smart idea. Other parameters, such as policy benefits, service quality, choice of policies, etc., are also responsible and thus should always be considered while selecting an insurance company. 

A CSR for various life insurance companies is calculated using the following formula: 

CSR = (Total no. of claims settled in a fiscal year/Total no. of claims in a year) X 100

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CSR of Life Insurance Companies – IRDAI Annual Report 2021-22

The recent data for Claim Settlement Ratio is available in IRDAI Annual Report for the 2021-22 financial year. This is calculated on the basis of individual claims settled over total claims (individual) for the financial year. Below is the table illustrating the claim settlement ratios of term insurance companies in India for FY 2021-22:

Insurance Company  Claim Settlement Ratio (CSR)
Aditya Birla Sun Term Insurance 98.07%
Aegon Term Insurance 99.03%
Ageas Federal Term Insurance 97.03%
Aviva Term Insurance 98.39%
Bajaj Allianz Term Insurance 99.02%
Canara HSBC Term Insurance 98.44%
Edelweiss Tokio Term Insurance 98.09%
Future Generali Term Insurance 96.15%
HDFC Term Insurance 98.66%
ICICI Prudential Term Insurance 97.82%
IndiaFirst Term Insurance 96.92%
Kotak Term Insurance 98.82%
Max Term Insurance 99.34%
PNB MetLife Term Insurance 97.33%
Pramerica Term Insurance 98.30%
Reliance Life Term Insurance 98.67%
SBI Life Term Insurance 97.08%
Shriram Term Insurance 82.39%
SUD Term Insurance 97.42%
Tata AIA Term Insurance 98.53%
Life Insurance Corporation 98.74%

Information Sourced from IRDAI Annual Report 2021-22

Disclaimer: Policybazaar does not endorse, rate, or recommend any particular insurer or insurance product offered by an insurer. 

If the claim settlement ratio of a company is higher than 95%, it is considered good. The average value of the claim paid will be high if the sales of term insurance are also high.

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Importance of Claim Settlement Ratio

The term insurance claim settlement ratio is always mentioned as a percentage. The standardization was done by the IRDAI (Insurance Regulatory Development Authority of India), and the information is published on an annual basis.

If you are buying a term insurance policy, you should have access to the claim settlement ratio of term policies. If you are sure about the claim processing capability, you will settle for the best term insurance plan.

  1. It helps assure the financial protection and security of your loved ones 

    By purchasing a life insurance plan, you ensure the financial protection of your family against unfortunate events. When the insurer settles the claim, your family is more likely to have a hassle-free, transparent and simple claim process. Thus, you can rest assured that your family does not have to struggle to receive the sum assured. 

  2. Indicates the reliability of insurance company 

    The term insurance claim settlement ratio indicates the ability of an insurer to pay the sum assured amount to you or your nominee. If your respective insurer is maintaining a high CSR consistently over a certain amount of time, they are considered to settle claims quickly and thus are called a reliable company. 

Factors that Influence Claim Settlement Ratio

The following factors will also impact the insurer’s CSR.

  • Non-disclosure – If the policyholder fails to inform the company about his/her true condition. Any health issues should not be hidden. When the insurance companies come to know the truth about your health that can adversely affect your insurability, the insurance company may reject your claim. Thus, non-disclosures negatively impact CSR.

  • Fraud – The policyholder may conceal information with the intention to cheat the insurance company. If the insurance company is suspicious about the authenticity of the proposer’s claim, the company may decline the claim. It will have a negative impact on CSR.

  • Ignorance of policyholder – If the policyholder fails to follow the terms and conditions mentioned by the insurance company. It is an extremely unpleasant experience when the policyholder isn’t clear about the terms and conditions of the policy. You should spend time and effort to go through the contents of the policy. If you are not sure of any clause, you can approach the insurance company directly or the agent.

  • Nomination update/error – If the policyholder fails to fill the nomination column in the insurance proposal form. It will have a negative impact on the insurance company. The insurance company may fail to process the claim if there is a delay in identifying the legal heir. The nominee should be present while settling the claim. If there is any dispute between two parties with reference to the nominee, the issue should be resolved. No claim settlement will take place until the dispute is resolved.

How to Choose the Best Term Insurance Company in India?

To choose the best term insurance company in India, you should consider the following factors:

  1. Claim Settlement Ratio

    The term insurance claim settlement ratio (CSR) helps you understand the company’s claim settlement abilities over the past financial year. Using this, you can compare term plans from different insurance companies and purchase the plan from the company with the most suitable term plan claim settlement ratio.

  2. Dedicated Customer Service

    You should always opt for a term plan from an insurer with the most dedicated customer service, as it can help you in the long run. The top 10 term insurance claim settlement ratio companies offer 24x7 customer support and resolve customer queries regarding the policy. 

  3. Customer Experience

    The customer reviews with the insurer give us an insight into the customer’s experience with the company. This way, you can choose a company with the best customer service.

  4. Inflation

    Inflation will reduce the worth of your savings. Hence, you should choose an insurance company with a ‘sum assured’ that fulfils your financial needs in the best possible way.

  5. Riders

    By choosing various kinds of riders, you will be eligible for a significantly increased financial benefit. There are various riders, such as critical illness, accidental death, accidental total permanent disability, waiver of premium, hospicare, and terminal illness, with which you will get a lump sum amount on the occurrence of the covered eventuality.

Wrapping It Up!

You should be aware of the term insurance claim settlement ratio while buying a suitable term policy. You can compare term plan from different insurers based on their term plan claim settlement ratios and make an informed decision about the term plan best suited for you. In addition to the term insurance claim settlement ratio, you should consider other prominent features as well in choosing the best term policy as per your objective. 

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