Just like how Sachin Tendulkar anchored India’s innings during crucial matches preventing a collapse when wickets kept falling, a good life insurance policy should provide an unwavering support to your family in times of crisis.

When India was on the verge of defeat, Sachin’s presence gave hope, just as a reliable insurer should ensure your loved ones don’t struggle financially in your absence. But not every batsman can handle pressure, and not every insurance company can be a saviour like Sachin during tough times. That’s why the claim settlement ratio (CSR) is a key.

Most of the life insurance buyers commonly consider factors like premium amount, features, add-ons and benefits but overlook claim settlement ratios. This metric can tell you a lot about the insurance company offering the plan and help you make informed decisions.

Let’s explore why this ratio matters and how evaluating it can ensure you select the right life insurance policy for your financial needs.

What is the claim settlement ratio?

The claim settlement ratio is the percentage of insurance claims an insurer has paid out against the total claims it has received in a financial year. For example, if an insurance company received 100 claims in a year and successfully settled 98, its claim settlement ratio would be:

CSR = (Total claims settled / Total claims received) × 100

= (98 / 100) × 100

= 98%

The claim settlement ratio is a measure of an insurance company’s reliability and ability in settling customer claims. A higher claim settlement ratio may point to a better track record and makes the insurer more trustworthy.

Why is it important to select a company with a high claim settlement ratio?

Here are some reasons why you must select life insurance plan from a company with a high claim settlement ratio:

1. Higher chances of claim approval

A high claim settlement ratio indicates that the insurer settles most of the claims they receive in a year given that most of them are genuine. This increases the likelihood that your family will receive the insurance payout when they need it the most.

2. Faster and hassle-free claim process

Life insurance companies with a high claim settlement ratio usually have efficient and smooth claim settlement processes. For instance, a term insurance plan will provide life cover to the nominee in case of any unfortunate event to the life assured.

A streamlined process ensures that the nominee receive the payout quickly, without unnecessary delays or complications. In contrast, insurers with lower ratios may have slower and more complicated procedures, which can lead to delays or rejected claims.

3. Financial stability of the life insurance company

A company with a consistently high claim settlement ratio is likely to be financially stable. A high ratio may indicate that the insurer has sufficient funds to settle claims. This reduces the risk of your family being left without financial support in your absence.

4. Helps avoid fraudulent insurers

Companies with an unusually low claim settlement ratio may have a questionable reputation. In some cases, insurers with poor ratios may engage in fraudulent activities, which can put your family’s future financial security in jeopardy.

5. Peace of mind and financial security

Selecting a life insurance company with a strong claim settlement history gives you peace of mind. It ensures that your family’s financial security is protected in your absence.

How do you check the claim settlement ratio of an insurance company?

The claim settlement ratio of an insurance company is published on the insurer’s website and in the Insurance Regulatory and Development Authority of India (IRDAI) annual report. IRDAI conducts yearly evaluations and releases these reports to ensure transparency for policy buyers.

When choosing a life insurance company, make sure to look for a claim settlement ratio of over 95% maintained consistently for at least five years. This can help you select a company that has a reliable track record of settling claims.

Caveat

The claim settlement ratio is an important factor, but it does not give the full picture. A high ratio does not automatically mean that your claim will be processed smoothly. Some insurance companies may maintain a strong claim settlement ratio by approving small claims while rejecting or delaying larger ones.

Additionally, a high claim settlement ratio may not always result in quick payouts. Some companies may have impressive numbers, but can take months to settle claims. Additionally, while this ratio can reflect an insurer’s credibility, it does not guarantee financial stability. So the ability to settle future claims also depends on a lot of different factors, such as the company’s profits and losses, management, solvency ratio and more.

To make an informed decision, you should check if the company has consistently maintained a high ratio over several years. You must also assess other key factors, including the insurer’s brand value and longevity, solvency ratio, assets under management, policy benefits, customer reviews and the efficiency of their claims process. It is important to conduct a well-rounded evaluation to ensure you select a life insurance policy that truly safeguards your family’s financial future.

To sum it up

The claim settlement ratio is certainly a useful metric. It gives you an insight into an insurance company’s reliability, so make sure to evaluate it before buying a policy. However, you must also ensure to conduct thorough research and compare multiple plans by assessing other aspects like financial stability, claim processing time, policy benefits and customer reviews. Comprehensive research can help you make a well-informed decision.

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