Safeguarding your needs with an insurance plan has become a necessity and an integral part of smart financial planning. Whether it is health, life or motor insurance, choosing the right plan is crucial to build adequate coverage. But how does one choose a reliable plan? This is where analysing metrics of insurance companies like the Claim Settlement Ratio comes into play. If you are new to the insurance space, keep reading to learn what the claim settlement ratio is and why it matters.
What is the Claim Settlement Ratio?
A claim settlement ratio is an indicator of the insurance company’s ability to settle claims. It is the number of claims settled by the insurance company against the number of claims it received.
Since it showcases the insurer’s ability to honour its promises under the policy, CSR becomes a reliable indicator while choosing life insurance plans. The Insurance Development and Regulatory Authority of India is responsible for publishing an annual report of every insurance company’s claim settlement ratio that policy seekers can check before choosing a plan. IRDAI also mandates insurance companies to publish the annual CSR report on their official website, brochures, etc.
How Is It Calculated?: CSR is calculated by dividing the number of claims settled by the number of claims raised and multiplying the result by 100.
Why Is It Important?
Claim settlement ratio becomes a vital metric while choosing life insurance plans. Here’s how the term insurance claim settlement ratio matters:
Benchmark for Performance
The sole purpose of purchasing life insurance is to build a safety net for the beneficiary when the insured individual is not around. This is where CSR helps in choosing a reliable insurance company that has an impressive track record of settling claims efficiently.
Did You Know that according to IRDAI’s FY 2023-2024 report, private insurance companies settled around 99% of total death claims raised, within 30 days.
Builds Trust In Policyholders
Rather than being a mere contract between the insured and the insurer, life insurance is about trust that the insurer will step in during times of need. An impressive claim settlement ratio builds a trustworthy relationship between the insured and the insurer.
Pro Tip: Claims settled by insurance companies within 30 days of being raised are considered an effective and promising indicator.
Peace of Mind for Policyholders
Knowing that the needs of loved ones are protected even when the insured is not around gives peace of mind. With an impressive CSR, the insured can rest assured that their loved ones won’t have to run from one window to another to claim what is rightfully theirs.
Transparency and Accountability
Publishing the claim settlement ratio is an initiative taken by the Insurance Regulatory and Development Authority of India to bring transparency and accountability in insurance companies. The CSR is a reliable indicator that the insurer’s promises are not hollow.
Choosing the Right Life Insurance Policy
When it comes to choosing a life insurance plan, analysing multiple metrics becomes important. Apart from the CSR, here are a few considerations you can bear in mind to choose the right plan:
Your Financial Needs and Responsibilities
First, you should understand your financial needs and responsibilities that require a policy. This can include anything from building pure life cover to combining life cover with savings and investments for future financial responsibilities. This helps you understand the kind of plan you need.
Type of Life Insurance Plan
There are different types of life insurance plans available in the market, and to ensure that you make the right decision, you must first understand the types of plans and their coverage. For instance:
- A term plan is a reliable choice to build pure life cover.
- An endowment plan is a reliable option to combine the benefits of life cover and savings.
- A unit-linked insurance plan is a smart choice to combine the benefits of life cover and investment.
Coverage Offered under the Policy
Different life insurance policies offer different types of coverage and sum assured. Make sure to carefully evaluate the coverage offered under the policy to ensure that it aligns with your requirements.
Pro Tip: Choosing flashy policies might not be ideal. Rather, go for a plan that offers coverage for your needs at an affordable premium.
Reputation of the Insurance Company
The reputation of the insurance company plays a vital role when you are seeking a policy. A reputed insurance company offers wholesome coverage at affordable premiums, a seamless application and approval process, and a reliable claim settlement process.
Summing Up
The claim settlement ratio is a reliable and important metric for policy seekers to make an informed decision. Credit to IRDAI for bringing transparency and accountability in the insurance space in India. If you are looking for insurance plans, make sure to check the recent annual reports of insurance companies to pick a plan that steps in during times of need without any hassle.
