Why do you buy term life insurance? To protect your family from the financial challenges that they may face in the unfortunate event of breadwinner. You assume and expect that the insurance provider will pay out the coverage amount at the time they need it the most.
What if the insurer delays the payout or worse, refutes the claim?
Most people purchase insurance basis the premium payment. The lower the premium, the more value they feel they get. However, while premium cost is important, another equally important factor to consider is the insurer’s Claim Settlement Ratio.
What is Claim Settlement Ratio?
Claim Settlement Ratio (CSR) is the total number of customers’ claims the insurer has paid vis-à-vis the number of claims received.
How is Claim Settlement Ratio Calculated?
Life insurance claim settlement ratio is calculated using the following formula:
CSR = (Total Number of Claims Settled in a FY / (Claims Carried forward from previous FY + Total Number of Claims Received in a FY) x 100
For example, if an insurance company receives 980 claims in a year and 20 claims were carried forward from previous FY and settles 950 of those claims, the CSR for that year would be:
CSR = (950 / 20 + 980) x 100 = 95%
While the Claim Settlement Ratio is an important indicator of the insurance company’s credibility, you must also evaluate their financial strength, customer service, and products before you decide upon your plan.
Factors Affecting Claim Settlement Ratio
The first step to a seamless claim process is a duly completed application, both when applying for life insurance and when filing the claim. Insurance companies are compelled to reject a claim basis many factors, some of which are:
Non-disclosure or misleading information: Do not hide any facts when filling the application form for life insurance. Be honest about your age, lifestyle habits and occupation. Reveal any pre-existing medical condition especially because if this comes to light when filing the claim, your claim will not only be rejected but also liable for fraud. Be sure to fill up the form accurately and provide all mandated supporting documents.
Misrepresentation of facts: For e.g., if cause of death is suicide or under any circumstance not covered by the policy.
Incorrect nominee details: If there is any discrepancy in the nominee details, they could be denied the sum assured. Make sure that the name and relationship of the nominee is correctly provided in proposal form. Also, in case of important events like death, marriage or birth make sure the nominees are updated if required.
Non-Disclosure of Existing Life Cover: If you have an existing life cover or if your life cover exceeds the Human Life Value (HLV), your claim can be rejected. The HLV is calculated with various parameters such as your age, income, savings, working years left. The whole claim can be rejected if the applied cover and existing cover exceed the overall insurability of an individual.
What is a Good Claim Settlement Ratio?
A Claim Settlement Ratio higher than 80% is a good insurance claim settlement ratio. Another factor worth considering is the time taken to settle the claim. Anything less than 30 days is an ideal term insurance claim settlement ratio however in case of early claim this may be high. IRDAI provides Insurer 90 days to investigate a claim and 30 days for decision after the closure of investigation.
How to Check Claim Settlement Ratio
IRDAI, the Insurance Regulatory and Development Authority of India, publishes the Claim Settlement Ratio for life Insurance companies each year. To know the CSR of your preferred insurance company, visit the IRDAI website or search for IRDAI claim settlement ratio (year) on the internet.
How to Improve Claim Settlement Ratio
A successful claim settlement ratio is not just the insurer’s responsibility. Even policyholders have a role to play in this. These tips will ensure you improve your term plan claim settlement ratio.
1) Ensure that you have provided all details and documents accurately, without withholding or misstating information at the time of filling the application form.
2) Read all the fine print on the application.
3) Read all the fine print on the application.
4) Intimate the insurer as soon as possible when the unfortunate event occurs.
5) Ensure that your beneficiary and your own details, such as name, address, contact number are regularly updated, especially if you develop any critical health condition.
6) Understand the claim process and keep all the mandatory documents handy.
Remember, while Claim Settlement Ratio is important, so are the other factors stated above. If the Life Assured declared all the information correctly in the proposal form and the Insurer has issued the policy, then there is no possibility of claim getting rejected. This will help you invest in a plan that is reliable and as concerned about your family’s future as you.
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