What Does A Claim Settlement Ratio Refer to?
It is the number of claims paid against the number of claims filed - the higher the ratio, the better for the insurer. You will need to check on the claim payment ratio before selecting an insurer. What is the point of using life insurance if the beneficiary's policy argument is denied by the insurer? Therefore, you must ensure the insurer has a reasonable payout ratio for claims.
Every year the Insurance Regulatory and Development Authority (IRDAI) releases all life insurers' claim settlement ratios. You should check this data compulsorily before you decide on the insurer. Claim settlement ratio is a key factor to consider as it reflects the pattern of resolution of claims by an insurer. When choosing one, you must compare the claim payment ratio of different insurers.
What Does it Tell You?
It refers to the cumulative number of death claims settled by the insurance firm. The computation is done by dividing the total number of death claims received from the total number of death claims that were settled.
Setbacks of Claim Settlement Ratio
The declared claim settlement ratio is the sum total of all claims adhered by a company for all its life insurance policies as well as products. So what you see is only an estimated ratio and not the actual ratio for each type of policy–endowment cover, term insurance, child plan, money back policy, group insurance/individual cover, online plan or offline, etc.
Also, what you see is a figure in terms of percentage, not an actual number. So it does not give clarity about how many claims a company rejected in reality.
For example, an insurance firm rejects 100 claims out of 1,000 claims, 90% will be the claim settlement ratio. The following year it receives 10,000 claims but rejects around 500 claims. Therefore, the company's claim settlement ratio increases to 95%, but actually, the firm has rejected more claims.
