In our previous posts, we have spoken in detail about the various types of insurance and why they are necessary, in today’s slot
Claim Settlement Ratio is a very essential element of an insurance company. This ratio tells us about the number of claims settled, out of the total number of claims received by the insurance company.
This ratio is a measurement used to assess the reliability of an insurance company in paying the claims.
It is calculated using the simple formula shown below:
Claim Settlement Ratio = (Total number of claims paid during the time period)/(Total claims received)
Claims Received by an Insurance Company
The Insurance Regulatory & Development Authority of India (IRDAI) publishes and makes a ratio of all the insurance companies in India public in the first month of the calendar year.
While looking at the ratios of these companies, a policyholder should not just look at the ratio, but should look at the number of claims received by the company.
If a new insurance company has received 100 claims out of which 97 claims have been settled by the company, 1 claim is pending settlement and 2 claims have been repudiated, then this company has a claim settlement ratio of 97 % which is a good figure but the number of claims received here is very less, compared to another insurance company which has received 10,000 claims with a claim settlement ratio of 95.3 %.
This shows that a policyholder should not just look at the claim settlement ratio, but also the number of claims received by the insurance company and how big and old the insurance company is.
The Consistency of Claim Settlement Ratio
The consistency of the claim settlement ratio over the years also plays a major role.
The historical claim settlement ratio of companies in the past 5 years should be checked. There should not be inconsistency in claim settlement ratio.
Smaller the range of claim settlement ratio, better and more reliable the company is. A company with the ratio in the range of 90 % to 97 % is more reliable than a company with claim settlement ratio in the range of 75 % to 94 %.
Claim Settlement Ratio for 2016-17
|Insurer||Death claims received||Death claims paid||Claims rejected/repudiated||Claims written back||Claims pending||Claim Settlement Ratio (CSR)|
|Tata AIA Life||2,707||2,599||108||0||0||96.01%|
|India First Life||1,741||1,439||273||0||29||82.65%|
|Star Union Daichi||1,473||1,238||200||16||19||84.05%|
|Bharti Axa Life||878||811||33||0||34||92.37%|
|IDBI Federal Life||1,065||962||96||0||7||90.33%|
In the above table, Life Insurance Corporation of India (LIC) has the best track record with the highest number of claims received and one of the best claim settlement ratio.
This is followed by other insurance companies with a good track record. The top 10 companies in the table have a claim settlement ratio of more than 90 % which is quite a good number for insurance companies.
The Process of Claim Settlement
Claims can be reported online, at branches, central office, ClaimsCare helpline, SMS or email. This makes it more approachable for a policyholder.
The processing of the claim should be fast and should make the entire process of claim settlement hassle-free for the policyholder and his family. The lesser the average turn around time for settling the claim, the better it is.
After all the relevant documents are assessed and approved, the final settlement takes place. The claims should be settled as quickly as possible from the date of intimation.
Steps to Avoid Rejection of Claim
A policyholder can take a few steps to enjoy the benefits of your policy without having to face claim rejection.
It all starts when the policyholder signs the policy paper at the time of policy purchase. That is the time when the insurance company would assess the risk the policyholder possesses and underwrites the policy accordingly.
Steps that a Policyholder Must Follow in Order to Avoid Claim Rejection
1. The policyholder must make full disclosure of his/her details. If he forgets to mention his smoking habits or his medical condition, the way in which the insurer assesses his risk will differ.
In case the insurance company gets to know about this at the time of the claim, it could get rejected.
2. The policyholder should know what an insurance application form and ideally fill it out on his own. It is not advisable to get the insurance agent to fill out the form.
The agent may not be knowing the customer’s personal details and may miss out on mentioning something on the form.
3. The policyholder must check the policy documentation during the free-look period and examine if all the terms and conditions are as per his expectations.
In case he is not satisfied with any of the clauses in the policy, he can return the policy back to the insurer for a refund.
4. As soon as the policyholder has purchased the policy he should inform his nominee of the same.
If there is a situation in which the nominee is needed to raise a claim under the policy, he should know about the policy and should accordingly follow the prescribed claim filing process.
If the claim filing is done in the right way, the claim settlement process is also faster.
The claim settlement ratio of an insurance company is a good indicator to provide an insight into the buyer in deciding the policy.
A policy holder should not limit his research to the claim settlement ratio but should also check the coverage offered by different plans from various insurance companies.
Finally after checking all this one should decide the plan that best suits his needs.
Disclaimer: The views expressed in this post are that of the author and not those of Groww