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Things to Consider Claim Settlement Ratio While Opting for an Insurance Plan

A life insurance policy protects the financial security of the life assured's family in the event of his or her death. As a result, it is critical to select the finest life insurance coverage to fulfil your needs at a reasonable price.

Furthermore, it is important to choose a reputable insurance provider for the policy contract in order to prevent complications in the case of an unexpected incident. Several factors can be considered while comparing different insurance providers. For example, the claim settlement ratio is a crucial measure that indicates the reliability of the insurance provider.

 

What is a Claim Settlement Ratio?

The claim settlement ratio (CSR) refers to the percentage of claims settled by the insurance provider. A higher claim settlement ratio is preferred since it indicates the insurer's credibility and reliability. It is calculated by dividing the total number of claims settled in the year by the total number of claims made in that year, and multiplied by 100

Why is it necessary while purchasing life insurance?

The primary goal of a life insurance policy is to pay death benefits to the family of the deceased life assured. If the insurer has a poor credibility rate, it demonstrates disloyalty to the contract and contradicts the entire purpose of the contract policy. The problem worsens if the family's claim is denied and the deceased life assured was their sole earner. In this situation, the policy was their only option for overcoming financial difficulties. Therefore, it is prudent to evaluate the company's claim settlement ratio while purchasing insurance from them.

Let’s take a look at a few more reasons to evaluate the claim settlement ratio

It contributes to your family's financial security

The entire purpose of purchasing life insurance is to provide financial security in the event of an unexpected incident. However, if the insurance provider does not honour your claim, the objective is undermined. If, on the other hand, the insurer respects the majority of claims, your family is more likely to experience a straightforward, transparent, and trouble-free claim procedure. Thus, you can be certain that your loved ones will not have a difficult time obtaining the sum assured. This is why you must choose an insurance provider with the best claim settlement ratio.

Indicates the dependability of the insurer

The claim settlement ratio reflects the insurer’s capacity to pay the amount guaranteed to you or your nominee. If your supplier has continuously maintained a high CSR over a long period of time, they are unlikely to renege on their compensation obligation.

How is a claim settlement ratio calculated?

Claim settlement ratio is calculated using the following formula :

Claim Settlement Ratio (CSR) = (Total number of claims resolved in a year/Total number of claims in a year) X 100

For example, Company A resolved 9,500 claims out of a total of 10,000 claims for 2019-2020. Thus, its CSR will be 95% (9,500/10,000*100).

Wrapping Up

The consistency of the insurance provider's claim settlement ratio is critical since the range provides a better sense of the company's claims rejection record. This is why, it is prudent to examine the company's IRDA claim settlement ratio over the last five years. Furthermore, a smaller range suggests that the firm is dependable. A range of 91-95 percent, for example, is preferable to 86-93 percent.

Disclaimer:

*Tax benefits are as per the Income Tax Act, 1961, and are subject to any amendments made thereto from time to time
The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale.
Make responsible financial decisions. Consult with your financial advisor before making any decisions on insurance purchase.

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