Claim Settlement Ratio

When choosing a life insurance policy in India, many people focus on the premium amount. Mostly, they select an insurer that offers the best deal in terms of policy price. However, while the premium is important, another key factor to consider is the insurer’s claim settlement ratio (CSR).

A CSR is published by the IRDAI every year and shows how well an insurer handles claim payments. It indicates how reliable an insurance company is when paying out claims. By comparing the CSRs of different insurers, you can choose a trustworthy insurance company.

In this article, let’s understand the claim settlement ratio in detail and see why it is important. Also, we will check its calculation and the actual claim settlement process.

• The claim settlement ratio shows how well an insurer pays claims. A higher CSR means the company pays the most insurance claims it receives in a year.

• While evaluating, always check for CSR consistency over at least five years.

• A lower CSR range means the insurer regularly settles claims.

• Generally, a claim settlement process involves three steps: reporting, document submission, and processing.

The CSR of an insurance company shows how many claims it successfully pays out compared to the number of claims it receives in a year. For example, if a company receives 100 claims and pays 90 of them, its CSR would be 90%.

This number helps you understand how often an insurer fulfils its promise to policyholders.

Experts recommend choosing an insurer with a high CSR when buying a policy. This increases the chances that your nominee will receive the benefits if a claim is made.

With a higher CSR, you also get peace of mind as you know that your family is more likely to get financial support in your absence.

The CSR shows how reliable an insurance company is in paying claims. A key rule to follow is that companies with a “lower CSR range” are more dependable. For the unaware, the CSR range shows how consistent a company's claim settlement ratio is over time.

A "wide CSR range" means that a company's CSR varies significantly from year to year. In such companies, there is a risk that they may settle fewer claims. This makes the insurer less reliable. On the other hand, a "lower CSR range" means the CSR is more consistent and stable. This indicates the company settles claims regularly.

Therefore, it is important to choose insurers with a consistent CSR over time. While it might seem tempting to go for a company with an extremely high CSR, remember that consistency matters more.

Ideally, you should always review a company's CSR for at least the last five years to make a confident choice. Next, remember that the CSR reflects all types of insurance claims the company handles. It includes health, life, and other insurance policies.

The CSR is calculated using a simple formula:

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

Let’s understand better through an example,

• Say an insurance company receives 10,000 claims in a year.

• It successfully settles 8,500 of them.

• Now, the CSR will be 85% (8,500/10,000 x 100)

Most insurance companies settle claims following a three-step process:

Step I: Simple reporting

Firstly, you report claims through various methods, such as online platforms, branches, SMS, email, or simply using helpline numbers. This flexibility makes it easier for policyholders to inform the insurer quickly.

Several insurance companies nowadays offer multiple channels so that policyholders can report claims in a way that suits them best.

Step II: Document submission

Once a claim is reported, the policyholder must submit all necessary documents. Next, the insurer assesses the claim promptly and ensures a quicker approval process. Always remember that proper documentation prevents unnecessary delays. A smooth and fast claim process depends largely on having complete paperwork.

Step III: Processing

The claim is then processed by the insurance company. Due to advances in technology, this stage has become quicker and more hassle-free. For smaller claims, like those under Rs. 50,000, settlement can even happen within a day. Usually, the amount is credited directly to the designated bank account of the policyholder.