Claim Settlement Ratio is the number of insurance claims settled by a life insurance company as a percentage of numbers of claims received over a particular period of time. It is measured for all the products of the life insurance company in a given financial year. IRDAI issues the claim settlement ratio of all the life insurance companies in its annual report, which can be easily found on the internet.
- Why it is important to check CSR of a Life Insurance Company?
- How is Claim Settlement Ratio calculated?
- Claim Settlement Ratio = Numer of claims approved/Total number of claims received
- Individual Death Claim Settlement Ratio of Life Insurance Companies for the year 2015-2016
- Key aspects about Claim Settlement Ratio:
Settlement of Claim is one of the most important services which is provided by an insurance company. That’s why knowing the reliability of a company regarding its claim settlement is very much necessary. A Claim Settlement Ratio acts as one of the most important yardstick to determine the claim settlement capacity of the life insurance company. Higher the claim settlement ratio, the more favorable it would be for the policyholder. That’s why one should always look for a higher Claim Settlement Ratio aspect before buying a life insurance policy. However, this is one major aspect to ponder before buying a policy and other aspects must be looked upon as well along with “Claim settlement ratio” of the life insurance company.
Claim Settlement Ratio is calculated by dividing the number of claims approved by the insurance company with the total number of claims received.
Claim Settlement Ratio = Numer of claims approved/Total number of claims received
Let us understand this with an example:
|The XYZ Life insurance company received 1000 claims in the year 2015, out of which 900 claims were settled. So now, according to the formula of Claim Settlement Ratio
Number of claims received= 1000
Number of claims settled= 900
Therefore, Claim, Settlement Ratio= 900/1000
So, the CSR for XYZ company will be 90% for the year 2015
|S.No||Life Insurance Companies||Total no. of claims||Claims paid||CSR (2015-16)|
|6||HDFC Standard Life||12430||11811||95.02%|
|9||Canara HSBC OBC||571||531||92.99%|
|10||Bajaj Allianz Life||17967||16404||91.30%|
|14||Kotak Mahindra Old Mutual||2767||2465||89.09%|
|16||PNB Met Life||3094||2641||85.36%|
Source: IRDAI Annual Report 2015-16
- Claim settlement Ratio issued by IRDAI does deal with the type of life insurance policy, i.e. whether the claim received are money back policy, endowment plan or term plan. CSR is just an average of all types of life insurance policies.
- Higher the claim settlement Ratio, better are the chances of smooth claim settlement for the policyholder.
- While Claim Settlement is a one of the most important parameters for analyzing a company, it shouldn’t be the only yardstick before buying a policy.
- Every year, IRDAI issues an annual report on the insurance industry, which contains the details of the performance of insurance companies. This annual data contains the CSR of all the life insurance companies in India.
- One should also check the consistency of the Claim Settlement Ratio because the ratio is not static but changes every year.
- The insurance company is not always responsible for rejection of claim as there are many cases of impersonation, misrepresentation and fraud claims.
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