With the pandemic as a constant memory in the rearview mirror, an increased awareness among millennials & Gen Zs, and a sizeable inflation - we have never been more finance savvy. Our evolving demographics and approach towards savings and investments have encouraged us to opt for insurance plans that would eventually safeguard our family’s financial interest during our absence.
However, say, you are in the market to purchase a term insurance plan. How would you go about it? What would be your determining factors when choosing a term plan?
We recommend that your FIRST stop be Amount Settlement Ratio (ASR), which would help you determine the credibility of the insurer you are approaching. However, with ASR, that’s not the only significance.
Here’s a quick look at what ASR is, its importance, and the top-term insurance providers with the highest ASRs.
What is Amount Settlement Ratio (ASR)?
Amount Settlement Ratio (ASR) is the ratio between the total amount of claims settled by an insurance provider against the total amount of claims raised to the insurer. It is calculated by -
Amount Settlement Ratio = (Total amount of Claims settled / Total amount. of Claims filed/requested ) x 100
So, say, a term insurance provider had ₹100 crores raised in claims across a year, and the insurer settled ₹90 crores. Then the ASR of this insurer, for the year, stands at 90/100 * 100 = 90%.
What is the ideal Amount Settlement Ratio (ASR)?
Amount Settlement Ratio for an insurance company is subject to change from one year to the other. Now, generally, any insurer with an ASR of 90% and above is a decent enough company to approach for your term insurance plan.
However, if we get into the specifics, here’s a few things that you need to remember -
- A company’s ASR can be best calculated by taking the average of 3 consecutive years.
- If you want to compare insurers as per their ASRs and decide upon one insurer to avail of your term insurance plan, you will need to focus on the industry average for the last 3 years (currently that is 90.9). Now, choose one of the insurers who have a score of at least 3 points over the industry average.
What is the Importance/Significance of Amount Settlement Ratio (ASR)?
Let’s just say the Amount Settlement Ratio (ASR) clarifies what the Claim Settlement Ratio can’t (hence the latter should never be the only determiner when choosing a term insurance provider).
Confused? Well, let’s clarify this for you with case studies -
| Case | (CSR) | (ASR) | Insight Drawn |
|---|---|---|---|
| 1 | 91.68% | 54.4 | Steer clear of this insurer. While the insurer settles 91.68 claims for every 100 claims it receives, take a look at the ASR and you will realize that the insurer has mostly settled low coverage claims that would boost their CSR. On the other hand, they have rejected the claims for high coverage amounts that are low in numbers and hence wouldn’t reflect in CSR. This insurer is not exactly a reliable partner to have in your corner when you are trusting your family’s financial future. |
| 2 | 98.53% | 92.7 | This is a solid insurer to approach. The insurance provider has settled 98.53 claims for every 100 claims that it received. Moreover, one look at the ASR and you will know that irrespective of whether the claim is for a high or low coverage amount, this insurer has settled them to the best of their financial abilities. |
Now, let’s take a look at how and why the Amount Settlement Ratio (ASR) for a term insurance provider is crucial when finalising an insurer -
- The credibility of the insurer: Since the ASR reflects the amount of claim settled by the insurer, it speaks volumes about the insurance provider. This showcases the credibility of the insurer.
- Assurance for the potential and existing policyholder: Since the insurer’s credibility is very well reflected via the Amount Settlement Ratio (ASR), potential and existing policyholders are reassured with the offered policies. They have maximum chances of disbursal of the sum assured (as per the pre-decided terms and conditions), irrespective of the coverage amount, in the unfortunate event of their death.
What factors influence an Amount Settlement Ratio (ASR) for an insurer?
- Incomplete disclosure of personal information - In case you have failed to disclose your smoking habits, pre-existing medical conditions, or falsified data regarding your education or occupation, insurers will be forced to compromise or deny your claims. This in turn will affect the ASR of the insurer in question.
- Incomplete information about the nominee - If the insured individual has failed to explain the terms and conditions of the policy and the claim procedure and the nominee fails to file the claim properly, the claim will be denied. And the insurance provider will take a hit in their ASR.
- Fraud claims - Insurance companies will deny and reject your claims if any incidents of fraudulence are found in your claim. Under such circumstances, you will face severe financial hurdles due to no amount-disbursal despite continued premium payments; on the other hand, the insurer’s ASR will reflect a lower ASR despite no fault on their end.
Considering how denying or rejection of claims affects their ASR and subsequently their credibility (which might lead to them losing out on policyholders), term insurers are strict about the term insurance policy eligibility criteria and the following moratorium period.
While ASR is a crucial determiner when choosing a term insurance provider, it can’t be the only factor. ASR has certain shortcomings like failing to reflect the time required to settle the claim. This is a crucial factor that can help you understand if your claim settlement process will be a hassle-free one or not.
So, when choosing a term insurance provider, please consider - the Amount Settlement Ratio, Claim Settlement Ratio (CSR), the volume of complaints, and the product portfolio. Taking a look this into account, here’s a list of the top insurers in the market.
What are the Top 10 Insurers with the Best Amount Settlement Ratio (ASR)?
| Top 10 Insurers | Amount Settlement Ratio (ASR) | Claim Settlement Ratio (CSR) | Volume of Complaints |
|---|---|---|---|
| Aegon Life Insurance Co. Ltd. | 97.0% | 99.22% | 44.0 |
| Bharti AXA Life Insurance Co. Ltd. | 96.9% | 99.08% | 146.7 |
| Aviva Life Insurance Co. Ltd. | 96.9% | 98.38% | 111.6 |
| Pramerica Life Insurance Co. Ltd. | 96.5% | 98.57% | 45.0 |
| Max Life Insurance Co. Ltd. | 95.5% | 99.40% | 7.0 |
| Reliance Nippon Life Insurance Co. Ltd. | 94.8% | 98.59% | 3.4 |
| Aditya Birla Sun Life Insurance Co. Ltd. | 93.9% | 98.08% | 7.1 |
| Canara HSBC Life Insurance Co. Ltd. | 93.8% | 98.21% | 25.3 |
| Kotak Mahindra Life Insurance Co. Ltd. | 93.1% | 98.61% | 5.8 |
| Bajaj Allianz Life Insurance Co. Ltd. | 93.0% | 98.85% | 5.0 |
(The ASR, CSR and Complaint volume numbers listed above are an average of 3 years of data 2020-2023. The volume of complaints is the number of complaints filed per 10,000 claims.)
Conclusion
The Amount Settlement Ratio of insurance companies is a crucial factor when choosing a term insurance provider. However, make sure to also factor in the CSR, complaint volume, product portfolio, coverage options, and riders when you finalise a term insurance plan. This will provide you with a comprehensive insight into the provider and its credibility, and thus offer you the much-required peace of mind that your family will get the financial benefit of the sum assured in your absence.