Picture this: A policyholder has been paying premiums for years, diligently keeping up with the term insurance policy, and suddenly, the unthinkable happens. The policyholder passes away, leaving behind loved ones who depend on him/her financially. But instead of receiving the promised lump sum payout, your family is left struggling to navigate a complicated claims process with an insurance company that has a low claim settlement ratio.
The truth is, not all insurance companies are created equal. Some have a better track record of following through on their promises than others. That's why it's crucial to pay attention to the claim settlement ratio when selecting a term insurance policy.
In this blog, we'll explore everything you need to know about claim settlement ratios in term insurance. We'll break down what they are, how they're calculated, and why they matter. We'll also give you some tips on how to choose a policy with a high claim settlement ratio, so you can rest easy knowing that your loved ones will be taken care of in the event of the unexpected. So let's dive in and learn about how to ensure your family's financial security, no matter what happens
Understanding Claim Settlement Ratio in Term Insurance
Claim settlement ratio is a measure used by insurance companies to determine the percentage of claims they have successfully settled against the total number of claims received in a given period.
For example, let's say an insurance company received 100 claims in a year and successfully settled 80 of them. Their claim settlement ratio would be 80%.
How is the Claim settlement ratio calculated?
The formula for claim settlement ratio is:
Claim Settlement Ratio = (Total Number of Claims Settled / Total Number of Claims Received) x 100
So, if an insurance company settles 200 claims out of 250 received, the claim settlement ratio would be (200/250) x 100 = 80%.
A higher claim settlement ratio indicates that an insurance company is more reliable in terms of settling claims and is therefore a good indicator of the company's performance. It's important to keep in mind that other factors, such as Amount Settled Ratio (ASR), the types of policies offered and the premiums charged, should also be considered when selecting an insurance company.
Claim Settlement Ratios of all Life Insurance Companies (FY21-22)
|Name of Life Insurer||Claim Settlement Ratio (CSR)|
|Max Life Insurance Co. Ltd.||99.34%|
|Bharti AXA Life Insurance Co. Ltd.||99.09%|
|Exide Life Insurance Co. Ltd.||99.09%|
|Aegon Life Insurance Co. Ltd.||99.03%|
|Bajaj Allianz Life Insurance Co. Ltd.||99.02%|
|Kotak Mahindra Life Insurance Co. Ltd.||98.82%|
|Life Insurance Corporation of India||98.74%|
|Reliance Nippon Life Insurance Co. Ltd.||98.67%|
|HDFC Life Insurance Co. Ltd.||98.66%|
|Tata AIA Life Insurance Co. Ltd.||98.53%|
|Canara HSBC Life Insurance Co. Ltd.||98.44%|
|Aviva Life Insurance Co. Ltd.||98.39%|
|Pramerica Life Insurance Co. Ltd.||98.30%|
|Edelweiss Tokio Life Insurance Co. Ltd.||98.09%|
|Aditya Birla Sun Life Insurance Co. Ltd.||98.07%|
|ICICI Prudential Life Insurance Co. Ltd.||97.82%|
|Star Union Dai-ichi Life Insurance Co. Ltd.||97.42%|
|PNB MetLife India Insurance Co. Ltd.||97.33%|
|Sahara India Life Insurance Co. Ltd.||97.08%|
|SBI Life Insurance Co. Ltd.||97.05%|
|Ageas Federal Life Insurance Co. Ltd.||97.03%|
|IndiaFirst Life Insurance Co. Ltd.||96.92%|
|Future Generali India Life Insurance Co. Ltd.||96.15%|
|Shriram Life Insurance Co. Ltd.||82.39%|
Importance of a high claim settlement ratio
A high claim settlement ratio ensures that policyholders receive swift reimbursement for their claims, which can help alleviate financial stress and provide reassurance during difficult times.
A high claim settlement ratio can indicate that the insurer has a customer-centric approach, which prioritizes policyholders' satisfaction and aims to provide them with a positive experience throughout the claims process.
Measures the insurer's trustworthiness
The claim settlement ratio is a measure of the insurer's dependability, showing how likely they are to fulfill their commitment to pay the sum assured to you or your nominee. A consistently high CSR over a long period of time indicates that they are reliable and less likely to default on their compensation promise.
Factors affecting Claim Settlement Ratio
When it comes to insurance claims, there are certain factors that can influence the insurer's claim settlement ratio (CSR).
Concealing Information Can Negatively Impact Claim Settlement Ratio
Non-disclosure of any relevant information can negatively impact the CSR. If a policyholder fails to disclose any important details such as their occupation, lifestyle habits, or any previous claims history, it can lead to claim rejection or delay. Therefore, it's crucial for policyholders to disclose all the necessary information to the insurer while buying a policy to avoid any issues in the future.
Importance of Understanding Policy Terms for CSR
When it comes to term insurance, policyholders who don't take the time to read and understand their policy's terms and conditions may face negative consequences for their CSR. Failure to comply with the policy's requirements can result in claim rejection. For instance, if a policy requires the policyholder to provide regular updates on their health condition and they fail to do so, the insurer may reject their claim if they develop a related illness or condition. It's crucial for policyholders to carefully review and follow their policy's terms and conditions to ensure a successful claims process.
Negative Impact of Fraudulent Claims
Fraud is another factor that can negatively impact the CSR. If a policyholder tries to cheat the insurance company by concealing information, the company may decline their claim. For example, if someone tries to claim compensation for a loss or damage that didn't actually occur, it can be considered fraud.
Nomination Woes can be a reason for Claim Settlement Hiccups
Nomination update/error is also a factor that can impact the CSR. If a policyholder fails to fill in the nomination column in their insurance proposal form, it can cause delays in processing the claim. For example, if someone forgets to update their nominee after a change in their family situation, it can lead to disputes and delays in claim settlement.
In conclusion, selecting a term insurance policy with a high claim settlement ratio is crucial to ensure your loved ones' financial security in the event of your passing. By doing your research and choosing a reputable insurance company with a proven track record, you can have peace of mind knowing that your family will be taken care of during a difficult time.
Remember, a policy's claim settlement ratio is an important factor to consider when choosing the right term insurance policy. So take the time to evaluate your options, and don't hesitate to reach out to a trusted insurance agent for guidance.
With the right term insurance policy and a high claim settlement ratio, you can provide your family with the security they need to move forward with confidence, no matter what the future may hold.
FREQUENTLY ASKED QUESTIONS
What is a good claim settlement ratio?
A good claim settlement ratio is typically considered to be above 95%. This indicates that the insurance company has a high likelihood of approving and paying out claims, which can provide peace of mind to policyholders. However, it's important to note that the claim settlement ratio is just one factor to consider when choosing an insurance company, and other factors like customer service, policy features, and premiums should also be taken into account.
Which Insurance companies have the highest claim settlement ratio in Life Insurance?
Max Life, Bharati AXA Life, and Exide Life have the highest claim settlement ratios in term insurance for the year 2021-22.
What happens if your claim is rejected by an insurance company with a high claim settlement ratio in term insurance?
If your claim is rejected by an insurance company with a high claim settlement ratio, you can appeal the decision or file a complaint with the insurance ombudsman or the IRDAI. It's important to carefully review your policy documents and the reason for the claim rejection to determine your next steps.