Why Claim Settlement Ratio Is the Secret to Picking the Right Term Insurer

Life insurance isn’t just a policy—it’s a safety net that protects your family’s future in your absence. If the unthinkable happens and your family’s primary breadwinner is no longer around, the emotional toll is already profound, but everyday expenses and bills won’t disappear. This is where term insurance becomes invaluable as an income replacement tool, ensuring dependents aren’t left in financial distress.

But what if the security you’ve spent years strengthening fails when your loved ones need it most? That dire question keeps many policyholders up at night. Others, however, sleep soundly because they trust providers who come through—why? They’ve chosen insurers with a solid record of settling claims, often reflected in a high Claim Settlement Ratio (CSR).

Yet, relying solely on CSR can be misleading, as it only tells part of the story—there’s more to an insurer’s credibility than just the frequency of claims settled. In this piece, we’ll delve into the importance of term insurance for your family’s financial security, explore why credibility is crucial when selecting an insurer, and examine how CSR factors into a provider’s dependability and a potential policyholder’s decision.

If you have any more queries, I’ve got an idea that can help you avoid the sleepless nights spent in anxiety over choosing the right life insurer. Book a 30-minute call with us and get solid insurance advice from IRDAI-certified advisors! No spam, no cold calls - just a conversation for your customised policy!

What is the Claim Settlement Ratio?

The Claim Settlement Ratio (CSR)  = (Total number of claims settled in a year / Total number of claims in a year) X 100

It represents how reliably an insurance company honours its commitments to its policyholders. Higher the CSR, greater the likelihood that your family will receive the sum insured without unnecessary hurdles.

Which Term Insurers Have the Highest CSR?

No one wants to go through a cumbersome claims process in times of crisis, and in the insurance world, such a situation can sometimes be the haunting truth. This is where CSR can be a guiding light for individuals seeking credible providers known for settling claims.

The following are the term insurance providers with the highest CSR, and the associated claim settlement amounts:

How to Calculate Term Insurance CSR?

A high CSR highlights an insurance provider’s ability to provide policyholders with sought-after peace of mind. From a business standpoint, it is a clear sign that the company prioritises customer-centricity and has the financial health to deliver on its promises.

Claim Settlement Ratio (CSR) = (Total number of claims settled in a year / Total number of claims in a year) X 100

Picture a busy restaurant that gets 100 orders every day, with patrons eagerly expecting the meals they ordered to reach their tables on time. If the staff only get 60/100 orders correct, the establishment’s reputation would be ruined. On the other hand, if they got 95/100 orders right, the restaurant would retain its standing and build customer trust.

If we replace “correct orders” with “approved claims” and “the restaurant” with an “insurance company” in this scenario, it gives us a clear snapshot of how CSR works and what it can mean for a provider and policyholders.

Why is Claim Settlement Ratio Important?

As discussed, CSR is a crucial metric that can help you evaluate term insurance providers, particularly in the context of ensuring financial protection for you and your beneficiaries.

Here are a few more reasons why CSR is important:

• Insight into Claims Processing Efficiency

Apart from being an indicator of reliability, CSR serves as a measure of an insurer’s efficiency in handling claims. A higher ratio suggests that the provider has an optimised process in place, which can reduce the emotional and financial burden on beneficiaries during difficult times.

• Transparency and Accountability

Publicly available CSR enhances transparency and accountability within the insurance industry. This is why providers prominently display their CSR data as a sign of their commitment to ethical practices and customer service, which are key pillars in attracting and retaining consumers.

• Comparison Metric for Customers

CSR is a valuable comparison metric when selecting an insurer as it helps consumers assess the reliability of different providers and make informed decisions based on historical performance instead of marketing claims.

• Other metrics

In life insurance, it is important to consider that claims are never paid partially, things can only go one of two ways: either you get your entire sum insured or your claim is rejected due to premium payment lapses, non-disclosure of medical history, and more. And while CSR is an important metric to assess when choosing policies, it does not indicate how quickly claims are resolved or how long it takes the insurer in total. This is why you must always assess other factors like complaints volume, 30-day CSR and amount paid in claims before finalising your decision.

How do Insurers Maintain a High CSR?

Seeing as CSR is a critical part of an insurer’s trustworthiness, it is maintained through a number of specialised processes. Let us now delve into a few of them to give you a better understanding of the metric.

• Underwriting Practices

First and foremost, they employ stringent risk assessment through strict underwriting practices to accurately assess risks. This helps them proactively weed out fraudulent claims and maintain a higher CSR. Product design is also an important factor as a well-designed offering with transparent terms and conditions that minimise disputes and ambiguities in claims can be a key contributor to a better CSR.

• Fair Pricing

An appropriately priced insurance policy reduces an insurer’s worry of balancing their books or unfairly rejecting claims to maintain solvency as they have already priced the claim risk in their premiums. This leads to higher claim approvals and settlement, in turn, improving the CSR. 

• Fraud Detection Mechanisms

From a security perspective, insurers must establish strong mechanisms to detect and prevent fraudulent claims. This ensures faster processing of intimated claims, ensures that only legitimate claims are settled, and, most importantly, helps improve CSR.

If you have any more queries, I’ve got an idea that can help you avoid the sleepless nights spent in anxiety over choosing the right life insurer. Book a 30-minute call with us and get solid insurance advice from IRDAI-certified advisors! No spam, no cold calls - just a conversation for your customised policy!

The aforementioned steps delve into what insurance providers do to ensure they maintain a high CSR. Up next, we will explore what you can do to make sure your claims are always approved and settled. By taking the following steps, you can ensure a smoother claim process for yourself and contribute to the overall reliability that high-CSR insurers aim to uphold.

The Dos and Must-Dos for Term Insurance Policyholders

• Always keep your policy active and avoid lapse-related complications through timely premium payments. Set up auto-debit from your bank account for hassle-free payments.
• A prevalent reason behind claim rejection is a lack of transparency. To avoid this, be open about your medical history, habits such as smoking/drinking, and occupation to avoid denials on non-disclosure grounds.
• Another costly mistake comes from the mismanagement of key documentation. This is why you must always maintain a secure file (physical and online) containing policy documents, premium receipts and critical medical records.
• We have already touched upon this, but there’s no harm in reiterating important tips, is there? Regularly update nominee details and keep them informed of the changes to ensure no confusion arises during claim settlement. In addition, it is best to share a copy of the policy document with them.
• We are living in the digital age, make it work for you. Many insurers offer online claim intimation and tracking, which in many cases, can speed up the settlement process.
• The IRDAI issues circulars in multiple languages to cater to wider audiences. So if you are more comfortable with a regional language, request policy documents and communication in that language from your insurer.  
• Last but not least, always stay informed of any changes in rules that might affect your policy or claims procedure by regularly checking updates from the IRDAI. Every insurer also has an obligation to communicate the latest changes with their policyholders. Want a foolproof way to always be informed of informed updates? Just follow Ditto’s pages on Instagram, LinkedIn and X.

CSR is a critical indicator of a term insurer's reliability and commitment to fulfilling its promises. While a high CSR is essential, it's equally important to consider other factors like the insurer's solvency ratio, customer reviews, and overall financial strength. By carefully evaluating these aspects, you can choose a term insurer that truly safeguards your family's future.

Why Talk to Ditto Before Making Your Choice?

At Ditto, we’ve assisted over 3,00,000 customers with choosing the right insurance policy. Why customers like Dhiren below love us:

✅No-Spam & No Salesmen

✅Rated 4.9/5 on Google Reviews by 10,000+ happy customers

✅Backed by Zerodha

✅100% Free Consultation

You can book a FREE consultation. Slots are running out, so make sure you book a call now!

FAQs: