Whether you are thinking about family planning, are looking at a higher salary, or are getting inspired from peers, the purchase of life insurance products surely has quite a few catalysts/motivators. As the demand for life insurance products grew, potential policyholders deviated from the natural tendency to purchase a plan simply because their parents or peers had purchased it. Their financial awareness has inspired them to locate credible life insurance providers and suitable policies catering to their customised requirements.
If you are one such policyholder (potential or existing) seeking a credible life insurer, you must be acquainted with the term - “Claim Settlement Ratio” among life Insurance companies. This is one of the primary metrics used to measure the credibility of an insurer. However, Claim Settlement Ratio or CSR can’t be the sole metric used to determine the worth of a life insurance provider.
With that in mind, let’s take a quick look into the details of Claim Settlement Ratio - definition, significance, pros and cons, and best life insurance providers based on their CSRs.
Top 10 Life Insurance Providers Based on Their Claim Settlement Ratio (CSR)
What is Claim Settlement Ratio (CSR) among Life Insurance Providers?
The Claim Settlement Ratio, or CSR, of a life insurance company, offers insight into the insurer’s claim settlement track record. As a potential policyholder, you want an insurer with a stellar track record in terms of claim settlement; after all, you are entrusting the provider with a sizeable cover amount (often in crores) and hoping that it comes to the financial rescue of your family in the event of your unfortunate passing away. The last thing you want your family to face is a hassle over rejected claims to access the funds you left for them to meet their life stage goals.
Claim Settlement Ratio of a Life Insurance Company is given by -
(Total number of claims settled by an insurer across a year/ Total number of claims raised to the insurer across the year) * 100
If you are about to purchase a term insurance plan and are looking for a credible life insurance provider, the first step would be to approach an insurer with a CSR of 97 or above. Also, please remember, no matter how lucrative a term insurance plan sounds, if the offering insurer has a CSR of below 80, you better start looking around for another provider.
What are the Pros and Cons of Claim Settlement Ratio as a Credibility Metric?
Claim Settlement Ratio of Life Insurance Providers is an important metric to consult when you are finalising an insurer to avail of a term insurance plan. However, this isn’t the ONLY metric that can help you decide on a suitable and credible term insurer. While CSR offers an important insight, there are a few aspects that it fails to throw some light on, and these aspects are essential to be considered when choosing the best term insurance providers.
Here’s a look at the pros and cons of Claim Settlement Ratio as a measure of an insurer’s credibility -
- Pros of Claim Settlement Ratio
- Insight into the claim settlement track record of an insurer - One of the primary requirements that you seek in your insurer is the guaranteed assurance of claim settlement. Since CSR measures the number of claims settled against the number of claims filed, it gives you an idea about the claim settlement track record of the provider.an insurer's claim settlement track record - One of the primary requirements
- Helps in establishing a market reputation - Since CSR is one of the most marketed metrics and a primary element checked when you are finalising a term insurance provider, a CSR of 97 and above ensures that you have a great market reputation. This goes a long way in fetching potential policyholders.
- Offers a sense of peace to the policyholder - Once a policyholder views your CSR, they are assured that you, as an insurer, have a good claim settlement track record, thus offering them a sense of confidence regarding your credibility.
2. Cons of Claim Settlement Ratio
- No insight into the time required to settle claims - When you entrust a term insurance provider with a significant fund that is crafted to act as your income replacement, you would never want your beneficiary/family to undergo the hassle of delayed claim settlement. Unfortunately, the CSR of an insurer does not throw any light on the time required for the claim to be settled.
- Can easily be manipulated by the insurer - Let’s understand this with an example -
Say an insurer has 10 claims raised to them across a year - 8 of them are worth ₹1 crore, 1 is worth ₹2 crores, and 1 is worth ₹5 crores. The insurer pays off the 8 ₹1 crore and 1 ₹2 crore-worth claims.
The CSR will reflect that 9 claims have been settled of the 10 claims filed, thereby offering the insurer a CSR of 90%. Unfortunately, the insurer managed to get this high CSR despite choosing to smartly avoid/reject the claim that is worth higher than the rest.
This is not an insurer you would want to approach. However, the CSR may easily manipulate you into thinking that this is a credible life insurance provider.
These pros and cons explain why, despite being an important metric, the Claim Settlement Ratio among life insurance companies can’t be the sole element determining the credibility of an insurer.
What Factors Influence the Claim Settlement Ratio (CSR) among Term Insurance Providers?
When it comes to the Claim Settlement Ratio or CSR of trem insurance providers, a few factors can influence the numbers. If you are a term insurance provider, acknowledging these might be of substantial help -
- Claim Processing Efficiency: While CSR doesn’t reflect the time required to settle claims, an efficient settlement of claims offers streamlined processing, which in turn contributes to faster and thus, more number of claims settled across a year.
- Policyholder Disclosure: If the policyholder has disclosed all their medical history, employment details, lifestyle, and habits, it leaves very little scope for claim rejection. This helps boost the CSR of a life insurance company.
- Claim Settlement Documentation: Make sure to convey the detailed list of documentation required during a claim settlement. This ensures a lower risk of claim rejection and, hence, higher CSR.
- Company's Financial Health: A healthy financial status quo indicates a better shot at settling claims. So, ensure that the insurer in question has a great chance of sustainability over financial well-being in paying claims in the future.
- Underwriting Practices: A comprehensive and thorough underwriting process is essential when applicants appeal for a term insurance plan. This ensures that the policyholders are genuine and have a low risk (or a risk projection that can be managed by the insurer), leaving lower chances of claim rejection. This can help insurers enhance their Claim Settlement Ratio or CSR.
- Fraud Detection Mechanisms: Robust mechanisms to detect and prevent fraudulent claims help maintain a high CSR by ensuring that only legitimate claims are settled.
